CITATION: Landmover Trucks Inc. v. Bhullar, 2017 ONSC 195

COURT FILE NO.: CV-16-2526-00

DATE: 2017 02 01

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LANDMOVER TRUCKS INC., JASWINDER BOPARAI and JASDEV SIDHU, Applicants

AND:

HARBIR SINGH BHULLAR, 1515073 ONTARIO INC., HK UNITED TRUCKS LIMITED, JARNAIL SIGNH MAND a.k.a. JARNAIL SINGH, KARNAIL SINGH MAND a.k.a. KARNAIL SINGH, TARLOCHAN MAND and QUICKFIX TRUCK TRAILER REPAIRS Respondents

BEFORE: EMERY J

COUNSEL: JAMES S.G. MACDONALD and IRA NISHISATO for the Applicants

YADVINDER S. TOOR, for the Respondents HK United Trucks Limited, Jarnail Singh Mand a.k.a. Jarnail Singh, Karnail Singh Mand a.k.a. Karnail Singh, Tarlochan Mand and Quickfix Truck Trailer Repairs

HOWARD SHANKMAN, for the Respondents Harbir Singh Bhullar and 1515073 Ontario Inc.

HEARD: October 13, 2016

ENDORSEMENT

[1] The applicants have an application for declaratory injunctive relief, and for orders under the Business Corporations Act against the various respondents for the role each have played in the transfer of 22 trucks representing substantially all of the assets of the applicant, Landmover Trucks Inc. The applicants also seek damages in the amount of $1,000,000 for breach of fiduciary duty, oppression, conversion and trespass to personal property, as well as punitive damages and costs.

[2] Within that application, the applicants bring this motion to find the respondents, HK United Trucks Limited (“HK”) and Karnail Singh Mand in contempt of the order of Justice Tzimas dated June 6, 2016 (the “original order”) to return 9 trucks to Landmover pending trial. For the reasons that follow, I find that HK and Karnail Singh Mand have failed to comply with the terms of the original order requiring them to return the 9 trucks more particularly described in paragraph 2 of the original order and paragraph 3 of the grounds for the motion (the “9 trucks”) to find them in contempt.

[3] In the course of these reasons, I shall refer to individual parties by their first name after they are introduced for clarity, and because of the similarity between the names of Karnail Singh Mand and Jarnail Singh Mand.

BRIEF BACKGROUND

[4] The applicant, Jaswinder Boparai and the respondent, Harbir Singh Bhullar are the shareholders and two of the directors of the applicant, Landmover Trucks Inc. (“Landmover”). The applicant, Jasdev Sidhu is also a director of Landmover, but holds no shares.

[5] For reasons unrelated to the current motion, Harbir transferred 21 trucks owned by Landmover that formed part of its fleet of trucks operated or contracted out to other companies for construction and roadwork. Harbir transferred the 19 of those trucks into the name of the respondent, 1515073 Ontario Inc. (“151”), a company owned and controlled solely by himself. Ultimately, 151 would transfer ownership of all 19 trucks to HK. According to the evidence, HK is another contractor that owns and operates trucks, or contracts trucks out to other companies, for construction and other road work.

[6] HK is owned and operated by, Karnail. The other personal respondent, Jarnail Singh Mand is a manager at HK but is not an officer, director or shareholder.

[7] Another respondent, Quickfix Truck Trailer Repairs (“Quickfix”), is owned and operated by Jarnail. To complete the picture, Karnail is a mechanic at Quickfix. It should come as no surprise that Karnail and Jarnail are brothers. The other respondent, Tarlochan Mand, is also a brother of Karnail and Jarnail. Jarnail manages HK’s business with Tarlochan’s assistance.

[8] After Landmover discovered that Harbir had transferred the 22 trucks it owns and operates as part of its business to his own company 151, and upon learning further that 151 had transferred those trucks to HK, the applicants commenced the application. They immediately brought a motion on short notice to the respondents for a Mareva Order and other relief. Counsel for the applicants attended before Justice Tzimas on June 6, 2016, along with Harbir and Karnail. After denying Harbir’s request for an adjournment, Justice Tzimas made the original order on an interim basis, consisting of three parts:

(a) An order in the nature of a Mareva Injunction;

(b) An order that the respondents take all steps necessary to immediately and forthwith deliver possession of the vehicles and property listed as Schedule A to the order to the applicants at 2 Polenta Crescent, Caledon, (Bolton), Ontario, along with possession of the keys, insurance documents, ownership documents and licence plates relating to the use of those vehicles to the applicants; and

(c) Disclosure relating to the proceeds of sale if any of the trucks were sold, specifically, for the respondents to prepare and provide to the applicants within 10 days of the date of the order a sworn statement describing the use and present location of any proceeds of the sale of the property listed in Schedule “A” to the order which may have been sold prior to the date the order was made.

[9] From the evidence filed by the applicants, it would appear that the respondents have not complied with the second and third parts of the original order. There is no evidence about whether one or more of the respondents has breached that part of the original order in the nature of a Mareva injunction.

[10] None of the respondents returned any trucks or other property pursuant to the second part of the original order. Furthermore, none of the respondents provided a sworn statement or other accounting describing the use and present location of any proceeds from the sale of any truck or other property that may have been sold prior to the date of the original order. The applicants therefore brought this motion for contempt.

[11] On the day set aside to argue this motion, counsel for HK and Karnail provided a sworn statement in the form of an affidavit sworn by Karnail to answer the third part of the original order. The motion for contempt proceeded against HK and Karnail on the basis that they had failed to return the 9 vehicles described in the Notice of Motion.

[12] The respondents have brought their own motion, returnable the same day as the motion for contempt, seeking an order to set aside the order of Justice Tzimas on various grounds. Under the authority of Paul Magder Furs Ltd. v. Attorney General for Ontario, (1991), 1991 CanLII 7053 (ON CA), 6 OR (3d) 188 (Ont. C.A.), I declined to hear that motion first, and adjourned that motion to another date to be heard by me. In making that determination not to hear the set-aside motion first, I also found the decision of the Federal Court of Appeal in Canadian Human Rights Commission v. Canadian Liberty Net and Tony McAleer, 1996 Carswellnet 117, [1996] F.T.T. No. 1002 most persuasive. In that case, Justice Linden quotes with approval from the following texts:

24 Textwriters also recognize this principle. In Kerr, A treatise on the Law and Practice of Injunctions (6th ed., 1927) this passage appears [at page 668]:

An order for an injunction must be implicitly observed, and every diligence must be exercised to obey it to the letter. However erroneously or irregularly obtained, the order must be implicitly observed so long as it exists. A party affected by it cannot disregard it or treat it as a nullity, but must have it discharged on a proper application. A man who does not obey it to the letter so long as it exists is guilty of contempt, unless there be something to mislead upon the plain reading of the order, or a pressing emergency should make it impossible to comply with the order.

Dean Robert Sharpe (now Mr. Justice Sharpe) explained the principle in his book Injunctions and Specific Performance (2d ed., 1993), at paragraph 6.220:

It is well established that a contempt application is not answered by the assertion that the injunction was erroneously granted or even that it was void. The proper course is to move against the injunction or to appeal and the court will not permit the original order to be attacked collaterally in contempt proceedings.

[13] The applicant’s motion for contempt therefore proceeded as the only motion before the court that day.

[14] The relief requested to find contempt against HK and Karnail involves consideration of the test set out by the Supreme Court of Canada in Carey v. Laiken, 2015 SCC 17. In dismissing the appeal from the Court of Appeal, the Supreme Court of Canada confirmed the three elements required to meet the test for a finding of civil contempt:

1. The order alleged to have been breached must state clearly and unequivocally what should and should not be done;

2. The party alleged to have breached the order must have had actual knowledge of it; and,

3. The party allegedly in breach must have intentionally done the act that the order prohibits or intentionally failed to do the act that the order compels.

[15] The court discussed the importance of the respect for court orders and the purpose behind contempt of court as being a remedy that “rests on the power of the court to uphold its dignity in process … the rule of law is directly dependant on the ability of the courts to enforce their process and maintain their dignity and respect”: United Nurses of Alberta v. Alberta (Attorney General), 1992 CanLii 99 (SCC). The court further discusses how it is well established that the purpose of a contempt order is “first and foremost a declaration that a party has acted in defiance of a court order”: Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52.

[16] The contempt power is by its nature discretionary. The courts have consistently held that exercising the contempt power routinely to obtain compliance with court orders should be discouraged. It is a remedy and exercise of a power to enforce orders of the court that should be used as a last resort: Hefkey v. Hefkey, 2013 ONCA 44. Therefore, the power of the court to find contempt should be made sparingly, and only where the cautious use of the contempt power is the most appropriate form of relief to ensure compliance with an order.

[17] The Supreme Court of Canada focused in Carey v. Laiken on the third element in what is required to find a party in civil contempt. In addressing the issue of the required intent for a finding of civil contempt, the court confirmed the Canadian jurisprudence that contumacy, being the intent to interfere with the administration of justice, is too high a standard and is therefore not an element of civil contempt. This means that lack of contumacy is not a defence to a motion for civil contempt. To do the act that the order requires a party to refrain from doing, or to fail to perform an act that a court order requires or compels that party to do, is enough.

[18] The court also left open the possibility that a judge may exercise his or her discretion to decline from imposing a finding of contempt where it would work an injustice in the circumstances of the case.

[19] If a finding of contempt is made at the liability stage, this court cannot reopen that finding when it comes time to impose a penalty: Carey v. Laiken, at paragraph 67. One of the purposes behind having a two-stage hearing is to allow the court to determine if the contempt proceeding has had the desired effect of enforcing compliance with the order. See also Boily v. Carleton Condominium Corporation No. 145, 2014 ONCA 574.

[20] In this case, there has been a dispute between private individuals. As a general principle, courts have held that where there is no element of public defiance, civil contempt is seen primarily as coercive rather than punitive: Carey v. Laiken, at paragraph 31. Here, the pending motion for civil contempt would appear to have achieved the desired result in part by the accounting of sales proceeds by HK, but not with respect to the return of 9 trucks.

[21] HK and Karnail raise two procedural grounds to argue that the original order did not bind them until the court had the benefit of their evidence. They refer to paragraph 3 of the original order that directs the respondents to deliver any responding material to the application within 20 days, to submit to examination within 90 days thereafter, and that adjourns the balance of the application sine die.

[22] HK and Karnail object to the binding nature of the original order of them on the basis, although not articulated in this way, that the applicants had not put all facts before Justice Tzimas in a full and fair manner as required in the circumstances under Rule 39.01(6) to make full disclosure. This is more an argument Harbir and Jarnail would make at the set aside motion as the evidence relates to discussions between directors at Landmover to wind-up the company and to sell the assets.

[23] I do not consider the first procedural submission to detract from the binding nature of the original order. Both Harbir and Karnail attended before the court when Justice Tzimas made the original order. Karnail’s presence as the officer and director of HK therefore bound the company. Both HK and Karnail had firsthand knowledge of the order and its requirements, including delivery of the 9 trucks because Karnail was present when Justice Tzimas read out the order that day.

[24] HK, Karnail, Quickfix, Jarnail and Tarlochan did not bring a motion to set aside the original order until they served a notice of motion dated July 27, 2016. That motion has not been heard.

[25] Neither HK nor Karnail have brought a motion to stay the original order. There is no dispute that at all material time during or since the original order granted, HK has not returned the 9 trucks.

[26] On the second procedural ground, the Notice of Motion for the original order was served on short notice. It was not a motion brought without notice to invoke Rule 39.01(6).

[27] I further note that the parties were before the court on July 12, 2016 at which time further orders were made. By that time that HK and related parties had served their responding material as required under the original order. On July 5, 2016, HK and its related parties also advised the applicants of their intention to bring a motion to set aside or vary the original order that Justice Tzimas had made. This was the Notice of Motion dated July 27, 2016 that was ultimately served. That motion was never set down for hearing in prior to the applicants’ motion for contempt.

[28] HK and Karnail advance three substantive arguments why they should not be found in contempt for failing to comply with the terms of the order made by Justice Tzimas on June 6, 2016.

[29] First, HK and Karnail state that the order is not clear and unequivocal because paragraph one of the order granted a Mareva Injunction to preserve all assets, including the 9 trucks is inconsistent with paragraph two of that order that all 9 trucks be returned to Landmover.

[30] I do not give any weight to this argument. Each paragraph of the order is directed to the defendants but each as to a different purpose and relevant to alternative situations where any defendant had possession of any of the subject property, or not. On the evidence, Harbir had transferred the registered ownership of all 22 Landmover vehicles to his own corporation 151 on May 11, 2016 and May 18, 2016.

[31] The application was commenced on June 1, 2016. The parties appeared before Justice Tzimas on June 6, 2016 to obtain the order. The intent and purpose behind paragraph 1 of the order was to preserve and protect that property covered by the order that had been received and that remained in the possession of any affected defendant as of the date of the order. The original order prohibited any defendant from conveying or transferring any item of property to a third party.

[32] In contrast, paragraph 2 of the order required any defendant to return any item of property covered by the order in his or its possession as of the date of the order to the plaintiff under Rule 45 of the Rules of Civil Procedure. The purpose and intent behind paragraph 3 was to require any defendant who had received any item of property covered by the order that had been converted, conveyed, transferred or sold to a third party as of the date of the order.

[33] The order was clearly defined to allow Landmover to determine what property remained in the possession of any defendant, what property had been sold, on what basis and for what amount, and where the proceeds of such sale were held.

[34] In my view, each of the paragraphs in the order made by Justice Tzimas on June 6, 2016 operated in conjunction with each other because they addressed different fact situations and objectives. The order required compliance in different ways, depending on the circumstances of what property was in the possession of any defendant, and what property had been sold. The defendants were capable of complying with each paragraph of the order without breaching any other term of the order, or from being relieved from compliance with another paragraph.

[35] Second, HK and Karnail state that HK was a bona fide purchaser for value, without notice of all 9 trucks to oppose the motion. This argument is presumably made to persuade the court that any breach of the order in the form of the non-compliance with the requirement that HK return all 9 trucks to Landmover was not a willful or deliberate act because HK was a putative owner of those trucks.

[36] I addressed this argument in my determination that I would not hear the motion to set aside the order of Justice Tzimas at the same time or before the motion for contempt. HK and Karnail did not bring a motion to stay the order made by Justice Tzimas prior to the motion for contempt, or at all.

[37] I also heard evidence on the motion that Jarnail and Quickfix provided labour and materials to repair and service the Landmover vehicles in January or February 2016, prior to Harbir’s transfer of those vehicles from Landmover to 151. The evidence included facts that the vehicles were clearly marked with Landmover decals. For the purposes of this motion, it is my view that Quickfix and Karnail as the mechanic knew or ought to have known that 151 was not the registered owner of those trucks at the time.

[38] I also note that the evidence disclosed that Landmover owed approximately $246,000.00 to Quickfix for repair and service work to its trucks. It is clear from this fact that Quickfix and Karnail would have known Landmover was the registered owner of all those trucks. Harbir had assured Quickfix that this indebtedness for the repair and maintenance work to the Landmover’s trucks would be paid.

[39] It would appear that the entire purchase price for the 22 vehicles was made up in part by the funds payable under the financing agreement over time, and in part by the forgiveness of the total of accounts receivable from Landmover owing to Quickfix. The fact that Landmover received consideration in the form of forgiveness of its indebtedness means that Quickfix and Karnail knew that Landmover owned those trucks.

[40] The argument of HK and Karnail that HK was a bona fide purchaser for value without notice depends upon the absence of knowledge by any controlling mind of HK, including Karnail that either Landmover was the registered owner of each truck, or that 151 was not the beneficial owner. Karnail’s knowledge that the trucks may have been owned by Landmover is imputed to HK regardless of whether Karnail acquired this knowledge while working on the trucks at Quickfix, or in his capacity as an officer and director of HK.

[41] This is compounded by the evidence that Harbir was a close friend of Jarnail, and was known also to Karnail to make the triangle between himself, HK and Quickfix a continuous pattern.

[42] I therefore conclude on the evidence before me that as HK and Karnail knew or ought to have known that Landmover and not 151 was likely the true owner of the 9 trucks. If so, HK was not a bona fide purchaser for value without notice of those 9 trucks from 151. On this finding, the decision of HK and Karnail that resulted in non-compliance with the order made by Justice Tzimas to return the 9 trucks to Landmover within ten days of the date the order would be considered a willful and deliberate act.

[43] Third, HK and Karnail argue that they required all 9 trucks to continue operating for HK after June 6, 2016 to perform and complete the contracts between HK and its customers for road work.

[44] This argument has no merit whatsoever. It is no excuse for a party to state that its own interests and affairs justify the breach and continuing non-compliance with a court order. In fact, this argument essentially amounts to a concession by HK and Karnail that they knew the order applied to them and to the 9 trucks, and that they conscientiously acted in a willful and deliberate manner to serve their own interests by failing to comply with the order to return those trucks to Landmover.

[45] A party served with a court order must take active steps and must do all he can to comply with the court order, or to carry out its terms: GEAC J & E Systems Ltd. v. Craig Erickson Systems Inc., 1992 Carswell Ont. 762; Canada Metal Co. v. Canadian Broadcasting Corp. (1975), 1974 CanLII 835 (ON SC), 4 O.R. (2d) 585 (H.C.); and Bell ExpressVu Limited Partnership v. Rodgers (unreported – court file No. 06-CL-65744 – September 22, 2016 per Mesbur J.).

[46] I recognize that HK and Karnail have also made submissions in their factum to justify their conduct or to answer the motion. Those submissions include:

1. Harbir alleges Jaswinder misappropriated large sums of money from Landmover, or improperly directed funds to himself or related third parties. He also alleges that Jaswinder has diverted practically all business from Landmover to his own company.

2. Harbir and Jaswinder also agreed in 2014 to wind up Landmover after the 2015 season.

3. Harbir believed that transferring the trucks from Landmover to his own company, 151, was a way of protecting those assets from Jaswinder.

[47] These submissions have no substance as grounds to oppose the motion for contempt against HK and Karnail. This evidence may be relevant to the case between Landmover and its directors. However, the evidence relates to the apparent decision making process of Harbir as a director and shareholder of Landmover to transfer vehicles to 151. This evidence does not relate to the failure of HK or Karnail to return the 9 trucks to Landmover as ordered by this court.

[48] HK and Karnail also include the following submissions in their factum:

1. Justice Tzimas did not know the vehicles had been purchased for consideration;

2. Justice Tzimas was not informed of the decision to wind up Landmover; and

3. Information was presented by Landmover through Jaswinder’s affidavit in support of the motion on June 6, 2016 that misled the court.

[49] These further submissions are based on evidence that may be relevant on the motion to set aside the order made by Justice Tzimas. That evidence is not relevant on the motion for contempt. As the courts have repeated time and again, it is imperative that a court order be obeyed once it is made, unless and until it is stayed, set aside or appealed successfully. See Ontario (Securities Commission) v. Gaudet(1988), 1988 CanLII 4666 (ON SC), 65 O.R. (2d) 424, Canada (Human Rights Commission) v. Canadian Liberty Net, 1998 CanLII 818 (SCC), [1998] 1 S.C.R. 626 and Henco Industries Limited v. Haudenosaunee Six Nations Confederacy Council (2006), 2006 CanLII 41649 (ON CA), 277 D.L.R. (4th) 274 (Ont. C.A.).

[50] The language of the order made by Justice Tzimas is clear and unequivocal. I find beyond a reasonable doubt that HK has willingly and deliberately failed to comply with the order of this court to return the 9 trucks it was ordered to return. Karnail’s own evidence concedes that HK has retained those trucks to complete contracts HK has entered to earn income. I therefore find HK in contempt under Rule 60.11(1). Karnail as an officer and director of HK was the controlling mind of HK to make this wilful and deliberate decision. I therefore find Karnail to be in contempt of court because of this non-compliance as an officer or director of HK under Rule 60.11(6).

[51] The sanction hearing for this contempt shall be scheduled on a date before me to be fixed by the trial coordinator within 60 days. The motion of HK and Karnail to set aside the order of Justice Tzimas shall be scheduled for hearing by me at the same time.

[52] As terms of this order, HK and Karnail are hereby ordered to comply with the following terms on or before February 10, 2017:

1. Upon receipt of this endorsement and notice of this order, to park and keep parked in a safe and secure manner all 9 trucks and any trailers listed in Schedule “A” to the order made by Justice Tzimas at the HK yard, 6191 Atlantic Drive in Mississauga, Ontario without any use or operation of those vehicles until further order;

2. To serve an affidavit sworn by Karnail personally and as an officer and director of HK on or before February 10, 2017 that confirms the 9 trucks and all property listed in Schedule “A” to the order made by Justice Tzimas are parked in a safe and secure manner in the yard at HK Trucking as of the date of the affidavit, and that discloses the odometer reading for each truck as of that date;

3. That HK insure and keep insured the 9 trucks and other property listed in Schedule “A” for all risk until further order; and

4. That HK deliver possession of the keys, proof of insurance, ownership documents and licence plates for each of the 9 trucks and any trailers to Jaswinder on behalf of Landmover, and that Landmover retain possession of those items in a safe and secure manner until further order.

[53] I consider these terms to be appropriate for HK and Karnail to follow as an alternative to an order for the return of all 9 trucks to Landmover pending the hearing of the set aside motion for the following reasons:

1. HK is currently the registered owner of all 9 trucks. Before the true ownership of each truck is determined, possession of those trucks should remain with HK for insurance and liability reasons; and

2. Landmover no longer occupies the yard at 2 Polenta Crescent, in Caledon, Ontario. This was the address to which Justice Tzimas ordered HK and Karnail to “immediately and forthwith” deliver possession of the 9 trucks and other property listed in Schedule “A” to the order made on June 6, 2016.

[54] All previous orders made in this proceeding remain in full force and effect.

COSTS

[55] If either party seeks costs on this motion, they may file written submissions consisting of no more than three pages by February 14, 2017. The other party shall then have until February 28, 2017 to file responding materials limited to the same extent. No submissions in reply are permitted without leave. All written materials may be sent by fax to my judicial assistant, Ms. Priscilla Gutierrez, at 905-456-4834.

[56] If no written submissions are received by February 28, 2017, the parties shall be deemed to have resolved the issue of costs between them.

Emery J

Date: February 1, 2017

CITATION: Landmover Trucks Inc. v. Bhullar, 2017 ONSC 195

COURT FILE NO.: CV-16-2526-00

DATE: 2017 02 01

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LANDMOVER TRUCKS INC., JASWINDER BOPARAI and JASDEV SIDHU, Applicants

AND:

HARBIR SINGH BHULLAR, 1515073 ONTARIO INC., HK UNITED TRUCKS LIMITED, JARNAIL SIGNH MAND a.k.a. JARNAIL SINGH, KARNAIL SINGH MAND a.k.a. KARNAIL SINGH, TARLOCHAN MAND and QUICKFIX TRUCK TRAILER REPAIRS Respondents

ENDORSEMENT

Emery J.

Date: February 1, 2017