COURT FILE NO.: CV-15-1855-00

DATE: 20180507

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

SIKH LEHAR INTERNATIONAL ORGANIZATION

Plaintiff

-and-

SUCHET SAINI, NARINDERJIT SINGH MATTU, SULAKHAN SINGH ATWAL, PARAMJIT SINGH SIDHU, ACRES REAL ESTATE INC.

Defendants

BEFORE: Ricchetti, J.

COUNSEL: S. Schneiderman for Sikh Lehar International Organization

D. LaFramboise for Suchet Saini, Narinderjit Singh Mattu, Sulakhan Singh Atwal

Manjit Mangat, personally

Harkanwal Singh, personally

HEARD: April 23, 24, and 25, 2018

JUDGMENT ON DEPARTING TRUSTEES' LOANS

Contents

BACKGROUND.. 3

THE PARTIES. 10

THE EVIDENCE. 11

THE ISSUES. 11

THE ACCOUNTANT'S REPORT. 11

ANALYSIS. 13

The Position of the Departing Trustees. 13

The Position of the Remaining Trustees. 14

The Position of Sikh Lehar.. 14

Incomplete/ Analysis. 14

Gill & Co. 16

The “Register”. 17

The Sikh Lehar bank statements and General Ledger.. 19

The Role of the Departing Trustees. 19

The Onus. 22

Level 1 Loan Amounts Generally.. 22

The Transactions at Issue.. 22

Level 1 Mattu transaction #5. 22

Level 1 Saini transaction #89. 23

Level 1 Saini transaction #93. 24

Level 1 Saini transaction #62. 24

Level 2 Atwal transaction #3. 25

Level 2 Mattu transaction #1. 25

Level 2 Mattu transaction #6. 26

Level 2 Mattu transaction #9. 26

Level 3 Mattu transaction #10. 27

Level 3 Mattu transactions #11-16. 28

Level 2 Saini transaction #3. 28

Level 3 Saini transaction #49. 29

Level 2 Saini transaction #55. 29

Level 2 Saini transaction #58. 30

Level 2 Saini transaction #109. 30

Level 2 Saini transaction #118. 31

Summary of Adjustments to Total Amount of Loans Payable. 31

Deducting Repayments. 31

Interest.. 33

Promissory Notes/Interest to the Date of the Minutes of Settlement 33

Payment of the Accountant 's fees to testify.. 34

CONCLUSION.. 35

THE REMAINING FUNDS IN COURT. 35

COSTS. 35

BACKGROUND

[1] Nine persons decided to establish a Gurdwara at 79 Bramsteele Road in the City of Brampton (the “Property”). Sikh Lehar was established as a religious, private charitable organization with the nine persons, as Trustees, to buy the Property, manage and operate the Gurdwara.

[2] At the commencement of this proceeding, there were five remaining Trustees of Sikh Lehar. The five Trustees were: Suchet Singh Saini ("Saini"); Narinderjit Singh Mattu ("Mattu"); Sulakhan Singh Atwal ("Atwal"); Manjit Singh Mangat ("Mangat"); and Harkanwal Singh ("Singh").

[3] Saini, Mattu and Atwal are hereafter collectively referred to as the "Departing Trustees".

[4] Mangat and Singh are hereafter collectively referred to as the "Remaining Trustees".

[5] In 2015, this proceeding was commenced because of a dispute between Sikh Lehar Trustees regarding the sale of the Property. The Departing Trustees wanted to sell the Property to recover the loans they allegedly made to Sikh Lehar. The Remaining Trustees did not or wanted to control the sale of the Property.

[6] On April 30, 2015, given the issues and importance to the parties and the congregation of Sikh Lehar, the court encouraged the parties, namely the Trustees, all of whom were present in court, to attempt to settle this matter.

[7] On May 5, 2015, the parties entered into Minutes of Settlement (the “Minutes of Settlement”). The Minutes of Settlement were executed by the lawyers for the Departing Trustees and the Remaining Trustees. Sikh Lehar was not a party to the Minutes of Settlement. Nevertheless, the Minutes of Settlement resolved the issues in this proceeding. Or so it was expected.

[8] According to the Minutes of Settlement, Mangat and Singh were to pay $1,734,584 into the Trust account of the Departing Trustees’ lawyer, Mr. LaFramboise (the "Settlement Monies"). The Settlement Monies have remained there until the beginning of this hearing except for a deduction of $25,000 for Mr. LaFramboise’s legal fees as per the Minutes of Settlement. At the hearing, Mr. LaFramboise agreed and was ordered to pay the Settlement Monies, plus accrued interest, into court to the credit of this action.

[9] Paragraph 6 of the Minutes of Settlement provided:

An audit of the funding of the above-noted Defendants in the amount of $1,734,584, which is the amounts allegedly advanced shall commence on May 1, 2015 and be coordinated by both counsel and there may be external auditing assistance hired which their costs will be paid equally among the five trustees. The accounting will settle all monies that the Defendants are owed by Sikh Lehar, and the Defendants will desist from claiming further monies from Sikh Lehar, even if such claims are made from them by third parties.

[10] The amount of the Settlement Monies was the principle amount of the alleged loans owing to the Departing Trustees. There was no claim for interest. The Minutes of Settlement do not provide for any payment of interest.

[11] Once the Settlement Monies were deposited into Mr. LaFramboise's trust account, the Departing Trustees resigned as Trustees of Sikh Lehar and they had no further involvement in the administration and operations of Sikh Lehar.

[12] Counsel could not resolve the amounts owing to the Departing Trustees. The parties could not agree on an accountant to perform the “audit”.

[13] Eventually, this court ordered the Remaining Trustees to produce three accountant names with no connection with Sikh Lehar and then, the Departing Trustees could choose one accountant to conduct the “audit”. In addition, because of the impasse, the court order also provided:

This accountant to verify the amount owing to Mr. LaFramboise's clients. I remain seized of the matter to deal with any difference from the $1,734,584 set out in the Minutes of Settlement.

[14] Eventually, counsel retained Mr. Simone of Parker Simone LLP, Chartered Professional Accountants to conduct the “audit” to verify the amounts owing to the Departing Trustees (the "Accountant").

[15] The Departing Trustees produced documentation, which they said was complete and verified the amount of the loans claimed. This documentation included a statement of the loan amount prepared by Gill & Co., Chartered Accountants ("Gill & Co.") who had been retained on behalf of the Departing Trustees. It is important to note that Gill & Co. had also been the accountants for Sikh Lehar for at least one prior year. While at times, this statement of loan prepared by Gill & Co was referred to as an audit by counsel for the Departing Trustees, it is clear that Gill & Co. did not conduct an proper audit (by accounting standards) but simply relied on what documentation they had and discussions with the Departing Trustees to confirm the amounts the Departing Trustees claimed was owed to them.

[16] Sikh Lehar produced certain financial documentation to the Accountant but most appeared to come from Sikh Lehar’s bookkeepers and Gill & Co.

[17] On September 18, 2015, the Accountant received "from the Organization's [Sikh Lehar] former bookkeeper its books of original entry, being the general ledger and cash receipts, cash disbursements and general accounts." This included Sikh Lehar's bank statements for 2009 to 2015.

[18] The Accountant sent a list of additional documentation required on September 18, 2015. Communications between the Accountant and counsel for the parties failed to resolve the issue so that an “audit” could be completed.

[19] By early October 2015, the audit had come to a halt. The Accountant reported to the court on October 13, 2015. The financial records needed to conduct an “audit” were incomplete and, even if available, would require considerable additional accounting work (and hence additional monies). Issues had already arisen regarding payment of the Accountant’s ongoing fees for the “audit”.

[20] The position of the parties was diametrically opposed. The Departing Trustees' counsel's position was that his "clients had provided documentation for every line item" and that the Accountant had all the documentation needed to complete his report. The Remaining Trustees' counsel's position was that the Accountant needed to do a significant amount of additional accounting work to "verify" the alleged outstanding loans to the Departing Trustees.

[21] The Accountant could not complete the “audit” without further documentation, if available. The parties were not prepared to spend considerable additional funds needed to complete the Accountant’s work.

[22] Counsel arranged a conference call to deal with the impasse. The conference call was held on October 15, 2015 with counsel for the Departing Trustees and the Remaining Trustees. Funding of the Accountant and completion of the audit were the issues.

[23] The court made the following order at the conference call:

The court appointed accountant shall complete his report on the amount owing to the Former Trustees based on the substantiated amounts as set out in documentation available to him.

Once his report is completed, it shall be delivered to both counsel. If the parties cannot agree on the amount payable to the Former Trustees, either party may bring the matter back before me on a date set by the Trial Coordinator's Office and convenient to the court appointed accountant so as to permit the court appointed accountant to give evidence if necessary to permit this court to set the amount.

[24] The dispute regarding the Accountant's fees continued. The Accountant required a further $20,000 to complete his report. The Departing Trustees refused, claiming that the Accountant had all the necessary documents to confirm the full amount owing to the Departing Trustees and that only a one-page report was necessary. The Remaining Trustees continued to deny the amounts of the loans were as stated. The Accountant refused to provide a report as he had not completed his analysis and need further monies to produce a report.

[25] On October 28, 2015, the Accountant wrote to counsel for the parties. In his email, he stated regarding the next phase of the engagement:

• Examine all of the evidence provided by the Former Trustees and compare each transaction to Sikh Lehar's general ledger.

• Stratify each of the documents provided by the Former Trustees' into categories of evidence quality.

• Make an assessment as to the amount of the verifiable loan balances.

• Draft our report to the Court.

• Prepare for attendance at court for presentation of our report.

• Present our report to the court and respond to legal counsels' questions concerning our report and supporting documentation.

The key objective in performing the first verification step is to determine whether or not each of the Former Trustees' loan transactions are in fact recorded as a loan transaction in Sikh Lehar's general ledger. It is important to note that any discrepancies found in this process does not in itself constitute a loan transaction recording error by either party. The converse is also true in that, just because both parties record a particular transaction as a loan transaction, it does not mean that they are correct in how the particular transaction is recorded. The fact that both parties characterize a transaction in a particular way does increase the likelihood of transactional accuracy, however both parties could have inadvertently made the same error with a particular transaction.

The principal objective to the second verification step is to stratify each document, provided by the Former Trustees, into categories of evidence quality. It is important to note that we have been provided various types of documents including the bank statements previously discussed. Documents provided include hand written notes to support certain transactions. This type of document represents a very low level of evidence quality whereas a transaction supported by a fully executed loan document provides a much higher level of verification quality. Transactions supported by only bank statements is also of limited evidentiary quality as these types of documents only provide proof that a cash transaction occurred but not the purpose of the transaction.

The third verification step is essentially the final process of arriving at a conclusion as to the verifiable amount of the loan balances owing to each of the Former Trustees. This step is in effect is the application of our professional judgement in determining the amount of the verifiable loan balances. I believe the remaining scope of work steps are self-explanatory, as such I will not expand upon them at this time.

[26] Counsel requested a conference call to deal with the non-payment of the Accountant’s fees. On March 31, 2016, a further conference call was held. This court directed the parties to pay the Accountant their respective portion of the additional fees needed to complete the report. In addition, this court directed the Accountant to complete his report and:

Should either side, upon receipt of the Report from the accountant, challenge the Report, they shall advise the other side and the court in writing within 15 days and thereafter obtain a date for a hearing before me.

[27] The Accountant delivered his report on May 16, 2016 (the "Report").

[28] On May 19, 2016, Sikh Lehar disagreed with the Accountant's conclusions in the Report and requested, in writing, that the matter return to court for judicial determination of the loan amounts owing to the Departing Trustees.

[29] On July 25, 2016, this court scheduled a hearing date to determine the proper quantum of the loans owed by Sikh Lehar to the Departing Trustees. The court ordered the parties to produce will say statements and attach “any new or add’l documents to be produced by any witness”. This gave the parties an opportunity, after having read the Accountant’s Report, to produce any additional documentation which were relevant to this court’s determination of the validity of the alleged loans. The parties were also given an opportunity to produce, serve and file expert’s reports on the issue to be tried.

[30] In 2017, Sikh Lehar went into Receivership. Issues arose regarding the stay in the receivership order and which parties were necessary and proper parties for the court hearing to determine the quantum of the loans to the Departing Trustees.

[31] On December 4, 2017, this court heard a motion for directions. The reasons are found at Sikh Lehar International Organization v. Saini, 2017 ONSC 7317. The court determined that the dispute regarding the Settlement Monies was between the Departing Trustees and the Remaining Trustees as these were the only parties to the Minutes of Settlement and who had a direct interest in the Settlement Monies. Sikh Lehar has no direct interest in the Settlement Monies. While the Settlement Monies were paid by Mangat and Singh, Mangat and Singh obtained a loan to pay the Settlement Monies to Mr. LaFramboise’s Trust account. Justice Lemay found that these monies were borrowed by Mangat and Singh on behalf of Sikh Lehar. See Sandhu v. Sikh Lehar International Organization, 2017 ONSC 5680. In other words, Sikh Lehar does have an indirect interest in the Settlement Monies as well.

[32] Sikh Lehar was a party to this proceeding, had an indirect interest in the Settlement Monies and could participate in the hearing if it chose to do so. This court concluded Sikh Lehar could participate in this hearing:

[57] The balance of this proceeding shall be conducted as follows:

a) There shall be a hearing to determine the amount of the Settlement Trust Monies payable to the Three Trustees (referred to above as the Accounting Hearing). The parties to this hearing shall be the Three Trustees, the Two Trustees and Sikh Lehar. A date for this hearing shall be scheduled by counsel with the Trial Coordinators Office in Brampton; and

b) Once the Accounting Hearing is completed, the balance of the Settlement Trust Monies shall be paid into court. There shall be a further court attendance to determine what claims or further steps shall be taken to deal with the balance of the Settlement Trust Monies. The parties to this attendance shall include all parties who have or may have a claim to those monies, including the Receiver.

THE PARTIES

[33] The Departing Trustees were represented by counsel at the hearing. The Remaining Trustees were self-represented. Counsel for Sikh Lehar was represented by counsel with the consent of the Receiver of Sikh Lehar.

[34] Neither Mangat nor Singh cross-examined, called any witnesses, or made any submissions during this hearing.

[35] At the outset of the hearing, counsel for the Departing Trustees raised an objection to the participation of Sikh Lehar. This issue is res judicata. This objection was raised at the December 4, 2017 motion for directions. This court had already determined that Sikh Lehar, as a party to this proceeding, had the right to participate, notwithstanding that it did not have a direct interest in the Settlement Monies.

THE EVIDENCE

[36] The Accountant testified and was cross-examined by counsel for the Departing Trustees and counsel for Sikh Lehar. Mangat and Singh had no questions.

[37] Each of the Departing Trustees gave evidence. Each was cross-examined by Sikh Lehar’s counsel.

THE ISSUES

[38] The sole issue to be determined is: what is the proper amount of the bona fide loans owing by Sikh Lehar to the Departing Trustees?

THE ACCOUNTANT'S REPORT

[39] The Accountant reviewed the list of alleged loan advances from each of the Departing Trustees. The Accountant then reviewed the documentation with respect to the documentation produced by both parties – bank statements, receipts, documents including Sikh Lehar’s General Ledger. The Accountant stratified the alleged loan amounts, "into three levels based on the quality of audit evidence" which he defined as follows:

Level 1: High quality audit evidence supporting a bona fide loan transaction, such as the promissory note signed by both parties; and/or transaction acknowledged as a loan by the Organization [Sikh Lehar] in its General Ledger.

Level 2: Inconclusive audit evidence supporting a bona fide loan transaction, such as personal funds withdrawal absent documentation corroborating corresponding receipt by the Organization; often acknowledge by the Organization but as other than a loan transaction; i.e. donations, rental revenue, other.

Level 3: Deficient audit evidence support a bona fide loan transaction, such as a hand written note, and no acknowledgement by the Organization.

[40] Using this process, the Accountant determined the following regarding the alleged loans claimed by each of the Departing Trustees:

Atwal:

Level 1 $80,000

Level 2 $30,000

Level 3 $98,861

Mattu:

Level 1 $274,700.57

Level 2 $193,800

Level 3 $61,544.26

Saini:

Level 1 $543,780.09

Level 2 $222,758.86

Level 3 $282,416.58

[41] During cross-examination, the Accountant testified that, if he was Sikh Lehar, he would pay the Level 1 transactions as bona fide loans. As for the Level 2 transactions, he stated that he would negotiate some amount, as further investigation and documentation might provide evidence that some of these transactions were bona fide loans. As for the Level 3 transaction, he stated, he would not pay these amounts.

ANALYSIS

The Position of the Departing Trustees

[42] The Departing Trustees claimed total loans to Sikh Lehar as of the date of the Minutes of Settlement as follows:

• Mattu - $ 530,044.83

• Atwal - $ 208,861.00

• Saini - $1,048,955.53

TOTAL $1,787,861.36

[43] At the conclusion of the evidence and during submissions, the position of the Departing Trustees changed. The Departing Trustees sought a finding that:

a) All Level 1 alleged loans in the Accountant’s Report be found to be bona fide loans;

b) The following alleged loans in Level 2 and 3 of the Accountant’s Report be found to be bona fide loans. The transaction numbers refer to the loan numbers assigned in the Accountant’s Report referring to each individual alleged loan by each Departing Trustee:

i. Atwal transactions #3 and 9;

ii. Mattu transactions #1, 6, 10 and 11-16; and

iii. Saini transactions #3, 5, 49, 55, 58, 109 and 118.

c) Counsel conceded that there was not sufficient proof, on the balance of probabilities, for the remaining alleged loan transactions in Level 2 and Level 3 in the Accountant’s Report to be found to be bona fide loans.

The Position of the Remaining Trustees

[44] The Remaining Trustees did not express a position but accepted and adopted the submissions of Sikh Lehar’s counsel.

The Position of Sikh Lehar

[45] Sikh Lehar submits that, because of the incomplete documentation and type of analysis conducted by the Accountant, no loans have been proven by the Departing Trustees.

[46] In the alternative, Sikh Lehar submitted that only the Level 1 loan amounts should be awarded but the amount of Level 1 loans should be reduced by:

a) $73,700 for repayment amounts not deducted by the Accountant;

b) Mattu transaction #5; and

c) Saini transactions 89, 93 and 62.

Incomplete/ Analysis

[47] The parties agreed to an “audit” in the Minutes of Settlement. However, all documentation necessary for a proper audit (as per CICA requirements) were not produced or available to the Accountant (if they would ever be) and the parties were unwilling to pay for a complete “audit”. Given these issues, the Accountant’s mandate was to work with what he had to determine which, if any, of the alleged loans were “substantiated”.

[48] Given that no party was prepared to fund the Accountant to do a proper “audit” and both parties expressed that all available financial documentation had been produced, there was little choice but to order the Accountant to proceed with the documentation he had received.

[49] It should be noted that the parties could produce new and additional documentation (if they had additional relevant documentation). Neither party chose to produce any new and additional documentation for the hearing. As such, the only inference is that both parties have produced all relevant documentation regarding the alleged loans.

[50] It is not open to the Departing Trustees to complain about the process because:

a) The Departing Trustees had, on numerous occasions, stated that they had provided all the documentation necessary to prove the loans from the Departing Trustees to Sikh Lehar;

b) It was clear by May 16, 2016 that the Accountant could not substantiate a large number of the alleged loans from the Departing Trustees to Sikh Lehar. On July 25, 2016, this court ordered the Departing Trustees to produce will say statements and attach “any new or add’l documents to be produced by any witness”. The Departing Trustees produced no will say statements and produced no new or additional documents;

c) The Departing Trustees had retained their own chartered accountants, Gill & Co, to review their documentation and prepare a report (called an audit by the Departing Trustees' lawyer in correspondence). There is nothing in the Gill & Co. correspondence which suggests a lack of documentation to complete their report. Gill & Co did not prepare a proper expert’s report as ordered by this court. No report was served on the opposing parties. No report was filed. As a result, this report (which is more of a letter) was never entered as evidence at the hearing;

d) The Departing Trustees did not object or appeal the October 15, 2015 order directing the Accountant to proceed based on the documentation he had received. When the Accountant wrote to the parties and set out the work he would perform under the change in scope of October 15, 2015, neither party expressed any objection or concern to the Accountant or raised any issue with this court.

[51] Sikh Lehar submits that this court should reject all findings of substantiated loans by the Accountant. Sikh Lehar points to the “change in scope” of the engagement. Sikh Lehar’s counsel was present during the October 15, 2015 conference call (not counsel at the hearing). Sikh Lehar chose not to object or appeal the order directing the Accountant to proceed to prepare a report based on the documentation he had received. Sikh Lehar did not object or express concern when the Accountant set out the revised scope in his correspondence or raised any concern with this court.

[52] I do not accept the submission of Sikh Lehar’s counsel for the following reasons:

a) the majority of any possible additional documentation that the Accountant may have needed to complete an audit was documentation from Sikh Lehar. As a result, it would be unfair for Sikh Lehar to now raise this issue;

b) The amounts determined by the Accountant to be in Level 1 are amounts shown in Sikh Lehar's own General Ledger statements to be outstanding loans to the Departing Shareholders. It is inconsistent and contrary to the evidence for Sikh Lehar's counsel, without having called any evidence and without any evidence from Mangat or Singh, to now state that those amounts are not bona fide loans owing to those Departing Shareholders for those amounts; and

c) In any event, the Accountant determined that the Level 1 amounts were of "high quality audit evidence supporting a bona fide loan transaction". As a result, the Accountant was satisfied that the documentation available to him was not only of high quality but it was "audit evidence" which is one of the highest standards for accountants.

Gill & Co.

[53] Gill & Co. produced statements for each of the Departing Trustees setting out alleged loans made by each Departing Trustee to Sikh Lehar. These statements have no evidentiary value for several reasons. First, Gill & Co. relied on what they were told by each of the Departing Trustees. Second, Gill & Co. relied on the registers (as described below) and did not consider or refer to the discrepancy with the Sikh Lehar General Ledger. Thirdly, despite having been given an opportunity to file an expert’s report and give evidence, no such report was served and filed by the Departing Trustees. Gill & Co. were not called as witnesses to the hearing. The contents of the statements are opinion evidence and are not properly before the court.

[54] As a result, Gill & Co.’s statements cannot be relied on by this court in arriving at its determination on each of the alleged loans.

The “Register”

[55] I agree with the Accountant’s comments regarding the extremely limited evidentiary value of the “Registers” produced by the Departing Trustees (referred to as handwritten notes by the Accountant) as proof of the existence and validity of the alleged loans.

[56] There are numerous reliability problems with the Registers:

a) These are handwritten notes on what appears to be a lined book. It is difficult to accept these as reliable financial records for the significant financial transactions for a major undertaking;

b) Not all pages of the entire lined book have been produced. Only a limited number of pages. Where is the rest? Do other pages show repayment or provide other explanations? Yet, Mattu confirmed that the entire Register was given to their Accountant, Gill & Co. It was not provided to the Accountant;

c) The pages have a name and an amount written on various lines with no further details - not even a reference to a loan. There is no purpose for the amounts beside the names - was it a loan, a donation, repayment or something else?

d) It is not always clear who wrote the entry on the Register. Only some authors were identified in court;

e) there is no evidence of reliance on these entries by Sikh Lehar's bookkeepers over the years. The Departing Trustees say the references are to loans but the bookkeepers did not enter them in the books of Sikh Lehar as loans in all cases. In some cases, these alleged loan amounts correspond to Sikh Lehar’s General Ledger but quite often, these amounts are not reflected in either the General Ledger or consistent with Sikh Lehar’s bank deposits. Sometimes, the alleged loans were shown as donations or shown as advanced by third parties. Given that the Departing Trustees were the majority of the Trustees and involved in the administration of Sikh Lehar, this is a serious discrepancy; and

f) In many cases, the amounts listed in this Register, have no other supporting documentation to verify the advance or the alleged loan.

[57] The Accountant stated that, some companies might use such handwritten notes as sub-ledgers. However, there is no reliable evidence that these Registers were in fact Sikh Lehar’s sub-ledgers. More importantly, as stated above, one would expect that the Registers, if indeed they were sub-ledgers, would be used to make entries in Sikh Lehar’s General Ledger. However, it is clear from the Accountant’s work that there are major and many discrepancies between what these handwritten Registers contain and what is set out in the Sikh Lehar General Ledger.

[58] This court places no reliance on the Registers as evidentiary proof of the alleged loans.

The Sikh Lehar bank statements and General Ledger

[59] The Accountant had, as part of his review, relied on Sikh Lehar's bank statements and the General Ledger available. The Accountant also reviewed and relied on supporting documentation such as Visa statements, receipts and other documents to support the alleged loans.

[60] The Sikh Lehar General Ledger recorded all of Sikh Lehar’s financial transactions since 2009. The Sikh Lehar General Ledger recorded under headings: “Member Loans Payable” and third-party loans. In addition, the General Ledger also show other categories of recorded transactions such as donations made by members and third parties. These entries are significant to the Accountant's review, since it shows how Sikh Lehar treated monies it received for financial reporting over the years.

The Role of the Departing Trustees

[61] Saini was a founding member of Sikh Lehar in 1996 and one of the incorporators in 2004. Saini was involved in the purchase of the Property in 2009. Saini was referred to as the “cashier” for Sikh Lehar.

[62] Saini testified that the Trustees used the Registers to record some financail transactions. They also had “small diaries” for every week. Saini suggested that the Registers were the only financial records kept for Sikh Lehar but then admitted that Sikh Lehar had “bookkeepers” after Sikh Lehar became incorporated in 2009. But Saini denied that he ever saw any formal financial books, records or ledgers for Sikh Lehar. This is difficult to believe. At times, Saini’s evidence was inconsistent and appeared self-serving. It simply makes no sense that he, Sikh Lehar's “cashier”, would operate Sikh Lehar in the fashion he did. I do not accept his evidence where it is inconsistent with the Sikh Lehar financial records prepared by the bookkeepers and relied on over the years by Sikh Lehar.

[63] Mattu was also a founding member. He was a Vice President at the time. He was not involved in the accounting. His evidence regarding the Registers adds nothing to their reliability.

[64] Atwal had no position in Sikh Lehar. He had never seen the Registers before.

[65] I do not accept the evidence of the Departing Trustees as it relates to the recording of Sikh Lehar's financial records:

a) It makes no sense that Sikh Lehar used handwritten notes in the “Registers” to keep track of some financial transactions, including loans from Trustees. The amounts of money are very large. Multiple persons could make entries in the Register. The Registers were kept by certain members at home during the week but brought to the Gurdwara on Sundays. Many individual notations in the Registers are undated. It is unknown who made many entries in the Registers. Entries on certain pages cover periods over several years. Many pages of the Registers are missing. Saini stated that these Registers do not reflect certain transactions such as cheques or electronic transfers. It is unclear what else the Registers do not reflect. It is unclear what the other pages of the Registers reflect. It is apparent that if these are the only financial records of Sikh Lehar, as suggested by Saini, there are many entries and transactions simply not captured by these Registers;

b) Where are the original Registers? Saini said he doesn’t know. But then said he had a full copy of the Register but it was never produced in evidence. Saini distanced himself from the Sikh Lehar General Ledgers stating that the bookkeepers never showed him such documents. This is difficult to accept for a founding Trustee and the “cashier” for Sikh Lehar. His evidence would suggest that no one was paying any proper attention to Sikh Lehar’s finances;

c) Saini admitted that they used bookkeepers from 2009 onwards. One would expect that the bookkeepers would, if the Registers are to be believed, rely on them to make the entries into the formal financial books of Sikh Lehar so that Sikh Lehar could prepare and file the Income Tax returns – which it did. Clearly, the Trustees had a responsibility to ensure the proper financial book of Sikh Lehar and the Income Tax returns were accurate but, according to Saini, he did not do that. Saini suggested that only his nephew dealt with questions raised by the bookkeepers - further distancing himself from the General Ledger. Saini’s nephew did not testify at the hearing;

d) None of the bookkeepers testified. They could have provided evidence regarding any connection between the Registers, the General Ledger and the Income Tax returns of Sikh Lehar (including the financial statments of Sikh Lehar);

e) When asked about Sikh Lehar’s tax returns, Saini distanced himself by denying he ever saw them or ever signed them. The Sikh Lehar tax returns have never been produced. These tax returns may have shed light on Sikh Lehar’s outstanding loans in the financial statements accompanying the returns;

f) It turns out that Gill & Co. performed an audit in 2013. Gill & Co. acted for Sikh Lehar then and more recently for the Departing Trustees. An audit Report was produced. Saini said he had never seen this audit Report. This audit Report was never presented as evidence in this hearing. Many of the loans alleged by the Departing Trustees pre-date 2013 and allegedly remained outstanding until 2015. The audit Report would have dealt with the then current status of Sikh Lehar’s loans to members including the Departing Trustees. Why was it not produced by the Departing Trustees? If the Departing Trustees did not have a copy, why not seek an order that Gill & Co. produce the audit Report? and

g) Atwal and Mattu are familiar with properly documenting loans they made to Sikh Lehar, as was evident from their promissory notes in 2009. Yet, they did not document their loans allegedly made in the subsequent years to Sikh Lehar, in some cases, for larger amounts than were the promissory notes. No explanation was given why they did not do so.

The Onus

[66] The onus is on the Departing Trustees to establish, on a balance of probabilities, that they made bona fide loans to Sikh Lehar. This proof applies to each of the loans that each of the Departing Trustees allege they made and remained outstanding at the time of the Minutes of Settlement.

Level 1 Loan Amounts Generally

[67] Given the "audit quality evidence" and the acknowledgement of the loans by Sikh Lehar, the Accountant's conclusion can hardly be questioned as establishing a bona fide loan on a balance of probabilities. Nevertheless, the parties were free to challenge each and every alleged loan. And they did challenge several of the loan transactions accepted by the Accountant.

The Transactions at Issue

Level 1 Mattu transaction #5

[68] This item relates to various Visa bills charged on Mattu’s Visa card purchased at various stores for supplies for Sikh Lehar.

[69] The Accountant allowed $3,148.97 of the amount claimed (having deducted $798) as a Level 1 amount. However, when cross-examined the Accountant could not connect these Visa bills to any amount shown in the Sikh Lehar General Ledger. There was no clear connection between the amounts charged on Mattu’s Visa and a loan (i.e. a mutual agreement that Mattu would be repaid by Sikh Lehar for these amounts).

[70] It would appear that the Accountant relied on the fact the invoices described the items as for Sikh Lehar.

[71] I am not persuaded this is sufficient to establish a bona fide loan from Mattu to Sikh Lehar.

[72] This evidence does not establish a loan on a balance of probabilities. This amount is removed from the Level 1 transactions.

Level 1 Saini transaction #89

[73] This item is a cheque from Sutlej Investments (“Sutlej”) to Sikh Lehar in the amount of $1,500.

[74] Sutlej is a Saini entity. It is not clear whether this is a separate corporation or a partnership.

[75] Sutlej is shown in Sikh Lehar's General Ledger as a different entry than Saini. Sikh Lehar recorded Sutlej transactions separately from Saini. Specifically, Sikh Lehar treated loans from Sutlej as separate from loans from Saini. There is no proof that the loans that Sutlej made were loans of or payable to Saini.

[76] The Accountant testified that he had no idea why this would be shown as a Saini loan to Sikh Lehar.

[77] I am not persuaded, on the balance of probabilities, that this Sutlej loan is a bona fide loan from Saini to Sikh Lehar.

[78] This amount shall be removed from Level 1 loans in the Accountant’s Report.

Level 1 Saini transaction #93

[79] This is an item for $10,000 dated April 2, 2013. The evidence shows that it was a cash withdrawal by Sutlej.

[80] The Sikh Lehar General Ledger shows a $10,000 advance from Saini on April 2, 2013 for “rental revenue” under the category of “members' loans payable”.

[81] The Accountant was satisfied that, regardless of what happened to the cash or the reference to rental revenue, the amount was advanced by Saini to Sikh Lehar as a loan. It is difficult for Sikh Lehar to now argue that it was not a loan from Saini. I am satisfied on the balance of probabilities that this is a loan payable by Sikh Lehar to Saini.

[82] This amount shall remain in Level 1 loans in the Accountant’s Report.

Level 1 Saini transaction #62

[83] This item is a $1,500 item showing a personal loan statement of Saini indicating a withdrawal for Sikh Lehar’s electricity deposit dated April 12, 2012. This was done at a time when Sikh Lehar did not have sufficient funds. This amount is shown on the Saini “Register”.

[84] The Accountant was satisfied that this was sufficient proof of the loan from Saini to pay this debt of Sikh Lehar.

[85] Based on the Accountant’s conclusion, and there being no evidence to the contrary, this court is satisfied that the amount has been established, on a balance of probabilities, as a loan from Saini to Sikh Lehar.

[86] This amount will remain in the Level 1 loan amounts found by the Accountant in his Report.

Level 2 Atwal transaction #3

[87] This item relates to a bank draft in the amount of $25,000.

[88] This amount appears in the Sikh Lehar General Ledger as a donation. It is not shown as a loan.

[89] There is no documentation, other than the Register, to substantiate a loan from Atwal.

[90] There was no explanation offered by Atwal as to why there is no loan documentation or why the Sikh Lehar General Ledger would show this amount as a donation.

[91] This amount is rejected as not proven.

Level 2 Mattu transaction #1

[92] This item relates to a cheque in the amount of $10,000 from Mattu Trucking Inc. to Sikh Lehar. This amount does not appear on the Sikh Lehar General Ledger as a loan from Mattu.

[93] The Accountant found this transaction to be a Level 3 – not Level 2.

[94] I agree with the Accountant. This transaction relates to a possible loan from a third party – Mattu Trucking Inc. and not Mattu personally.

[95] This court is satisfied that this amount should not be included in Mattu’s loans payable by Sikh Lehar as not having been proven.

Level 2 Mattu transaction #6

[96] This item relates to a $25,000 item. This transaction refers to a bank draft which notes: “personal loan to Manjit Singh Mangat”.

[97] Clearly, this appears to be a loan to Mangat. There is nothing in the Sikh Lehar General Ledger that this was a loan by Mattu for and on behalf of Sikh Lehar. Even if counsel is correct that this amount went into Mangat’s trust account (which is not proven on the evidence), the purpose of the Trust has not been established.

[98] This court is satisfied that this transaction has not been established as loan from Mattu to Sikh Lehar.

[99] This amount shall not be included in the loan amounts payable to Mattu as not having been proven.

Level 2 Mattu transaction #9

[100] This is a $193,800 item. This relates to a registered mortgage given by Guru Nanak Property Management Ltd. (“Guru Nanak”) to Sikh Lehar. There is a lawyer’s reporting letter for the mortgage addressed to “Guru Nanak Property Management Ltd.”

[101] Mattu submits that Guru Nanak is a company of his. That may be so but it does not establish that he, personally, loaned the amount to Sikh Lehar. Guru Nanak is a separate legal entity. Guru Nanak may be owed money under this mortgage. But it does not establish a loan from Mattu personally to Sikh Lehar. That is the only issue before this court.

[102] The Accountant stated that he had no information that Mattu was related to Guru Nanak. In my view this would not have made any difference to the establishment of the loan.

[103] The Sikh Lehar General Ledger shows the indebtedness as owing to Guru Nanak, not Mattu.

[104] This amount is rejected as not having been proven to be a loan by Mattu.

Level 3 Mattu transaction #10

[105] This item relates to an item of $11,250 on October 1, 2013. It relates to a possible “mortgage fee” for the Guru Nanak mortgage.

[106] The evidence on this transaction is limited. There was a loan commitment relating to the Mortgage. The Mortgage commitment provided for a loan fee. The loan fee was calculated by the Accountant to be $11,250. There is no further evidence whether this amount was paid, if so, by whom and on what basis.

[107] This amount appears on the Register but does not appear in the Sikh Lehar General Ledger.

[108] The Accountant concluded this was a Level 3 transaction. I agree.

[109] This court finds that this amount has not been established, on a balance of probabilities that it was paid, paid by Mattu and that it was a loan from Mattu.

[110] This amount is rejected as a loan from Mattu to Sikh Lehar.

Level 3 Mattu transactions #11-16

[111] These relate to payments from Sikh Lehar to Guru Nanak Property Management Ltd. This appears to be the amount of the monthly mortgage payments by Sikh Lehar under the Guru Nanak Mortgage.

[112] The Accountant determined these were Level 3 loan claims. I agree.

[113] There is no connection between payments made by Sikh Lehar and a loan by Mattu. Even if there is a connection between Mattu and Guru Nanak, this is a payment from Sikh Lehar not a loan to Sikh Lehar.

[114] These amounts are rejected as not having been proven.

Level 2 Saini transaction #3

[115] This item is a $15,000 item dated February 25, 2009 where Saini provided a cheque to Sikh Lehar. The cheque's memo states “lend money”. As stated by the Accountant, there was no documentation other than the Register supporting that this was a loan to Sikh Lehar. There was no corresponding entry in the Sikh Lehar General Ledger showing this as a loan from Saini to Sikh Lehar.

[116] The Accountant determined this to be a Level 2 transaction.

[117] At the time, Saini was a co-founder of Sikh Lehar and became its first Treasurer (and therefore controlled the financial records of Sikh Lehar). He later became its President for a number of years. Yet, at no time did the Sikh Lehar financial records (other than the Register) show this amount as a loan from Saini. Surely, this should have come up during the 2013 audit if there was an error.

[118] I am not persuaded that Saini has proven on a balance of probabilities that this advance was a loan from him to Sikh Lehar.

Level 3 Saini transaction #49

[119] This item is for $30,000. This was a personal bank withdrawal by Saini but was a transfer from Saini to Sutlej. This was not a loan directly to Sikh Lehar. There is nothing in the Sikh Lehar General Ledger showing that this amount was a loan from Saini. As stated above, Sutlej was also referenced in the Sikh Lehar General Ledger as having directly loaned monies to Sikh Lehar.

[120] The Accountant determined this to be a Level 3 transaction. I agree.

[121] I agree that there is insufficient documentation or evidence which establishes this as a loan from Saini to Sikh Lehar.

[122] This amount is rejected as not proven.

Level 2 Saini transaction #55

[123] This is a $25,000 item. The Accountant determined that the the bank statement showed a withdrawal from the Saini bank account. However, there was no corresponding entry on the Sikh Lehar bank account for the receipt of these funds nor any reference to a loan from Saini in the Sikh Lehar General Ledger. The Accountant concluded that there was no evidence to substantiate this was a loan.

[124] There was another withdrawal from the Saini bank account on the same day for $7,000 that was also alleged to be a loan. This amount was recorded as a Saini loan in the Sikh Lehar General Ledger. The question arises why the $25,000 alleged loan was not recorded as such by the Treasurer and President but the $7,000 loan was?

[125] The Accountant found this transaction to be a Level 2 transaction but showed it as a Level 3 in another part of his file. He testified it should have been a Level 3 transaction. I agree.

[126] This court is not persuaded that it has been established, on a balance of probabilities, that this was a bona fide loan from Saini to Sikh Lehar.

Level 2 Saini transaction #58

[127] This is a $20,000 item. This transaction was a cash withdrawal by Saini from his bank account. There is no other evidence to support that such monies went to Sikh Lehar or that this was a loan to Sikh Lehar. There is no reference to this alleged loan in the Sikh Lehar General Ledger. There is no further evidence to support that this was a loan by Saini to Sikh Lehar.

[128] The Accountant testified this was a Level 3 transaction.

[129] This court is not persuaded that it has been established, on a balance of probabilities, that this was a bona fide loan from Saini to Sikh Lehar.

Level 2 Saini transaction #109

[130] This is a $2,451 item. There was a deposit into the Sikh Lehar bank account for $3,961. This discrepancy was not accounted for. However, the Accountant could not find a corresponding entry in the Sikh Lehar General Ledger showing this entry.

[131] The Accountant recorded this transaction as a Level 2. Given the lack of information/documentation for this transaction, I agree.

[132] This court is not persuaded that it has been established, on a balance of probabilities, that this was a bona fide loan from Saini to Sikh Lehar.

Level 2 Saini transaction #118

[133] This is a $4,539 item. This was an invoice paid using Saini’s Visa. There is no entry in the Sikh Lehar General Ledger that this amount was a loan from Saini to Sikh Lehar. There is no other evidence regarding this transaction.

[134] The Accountant recorded this transaction as a Level 2 item.

[135] This court is not persuaded that it has been established, on a balance of probabilities, that this was a bona fide loan from Saini to Sikh Lehar.

Summary of Adjustments to Total Amount of Loans Payable

[136] The amount of proven loans for Atwal is $80,000 minus $3,148.97: TOTAL $76,851.03.

[137] The amount allowed as proven loans for Mattu is $274,700.57.

[138] The amount allowed as proven loans for Saini is $543,780.09 minus $1,500: TOTAL $542,280.09.

Deducting Repayments

[139] Having determined the amount payable to the Departing Trustees to be $893,831.69, Sikh Lehar submits there must be deducted the amount of $73,700 for the repayments shown in the Sikh Lehar General Ledger.

[140] The Departing Trustees' counsel submits that the Accountant's memorandum referring to this is an early memorandum and it is not clear whether repayments were or were not taken into account. I disagree. It is clear from the manner the Accountant reviewed the alleged loans to the Departing Trustees and the manner that he calculated the amounts in Levels 1, 2 and 3, that the Accountant was only using the principle amounts of the loans claimed by the Departing Trustees. There was no consideration of interest or repayments shown in the Sikh Lehar General Ledger. The Accountant used the lists of loans made by the Departing Trustees. Those lists did not contain payables. The Accountant determined which of the listed by the Departing Trustees were substantiated.

[141] The Report states that:

"the Organization's General Ledger loan payable balances were net of loan repayments made by the Organization to the Former Trustees. In performing this procedure we found that the Compilation Reports [those produced by the Departing Trustees] excluded any recognition of loan payments to support any of the loan repayments made by the Organization to the Former Trustees”.

[142] The Accountant testified that he did not take into account the Sikh Lehar repayments.

[143] I am satisfied that the total amount payable to the Departing Trustees must be reduced by the repayments made by Sikh Lehar to the Departing Trustees.

[144] As a result, the amount of $73,700 is to be deducted from the amount paid to the Departing Trustees from the Settlement Monies.

[145] There was no breakdown of the repayments made to each of the Departing Trustees. If the Departing Trustees cannot resolve the proportion of the $73,500 each Departing Trustee is to reduce their respective loan amounts, I can be spoken to.

[146] As a result, the net amount of loans payable to all the Departing Trustees is $820,131.69.

Interest

Promissory Notes/Interest to the Date of the Minutes of Settlement

[147] The Accountant did not deal with potential interest charges on the alleged loans.

[148] There are only two loans for which promissory notes exist. One for Atwal and one for Mattu. Both promissory notes are dated April 15, 2009. The notes relate to monies advanced to purchase the Property. Both promissory notes provide for a 5% interest. Both promissory notes expired on April 15, 2011. There is no evidence whether any interest payments have been paid on either of the promissory notes in accordance with the terms. There is no evidence what happened on April 15, 2011 or subsequently.

[149] The Departing Trustees submit that interest should be allowed at 5% per annum on all the loans because it should be "assumed" that all loans would carry such interest. I am not prepared to make such an assumption or engage in speculation.

[150] Sikh Lehar submits that there is a limitation issue. None has been raised to date as a defence. A limitation period is a defence. It must be established by the person alleging that the debt is statute barred.

[151] In this case, there is no evidence either way. In fact, if anything, Sikh Lehar continuing to show the amounts of the promissory loans in its General Ledger might easily be considered an acknowledgement of the loans right up until the time the Minutes of Settlement were executed. I am not satisfied that Sikh Lehar or the Remaining Trustees have established on a balance of probabilities or otherwise, that the loans referred to in either of the promissory notes are barred by a limitation period.

[152] The Departing Trustees did not claim interest when they made a claim for repayment of the principle amounts of their alleged loans in the Minutes of Settlement.

[153] The Departing Trustees did not provide any evidence that their loans (except the promissory notes) were to bear any interest. Absent terms for repayment or a provision for interest, these loans are “demand loans”.

[154] It is unclear if any demand was made, when such a demand was made or any other evidence to support a claim for interest.

[155] In my view, the lack of evidence on interest and the manner which the parties chose not to deal with interest in the Minutes of Settlement would lead this court to conclude that no interest should be paid on the bona fide loans until the date of the Minutes of Settlement.

[156] I am not prepared to allow interest on either of the promissory notes to the date of the Minutes of Settlement.

[157] As for interest after the Minutes of Settlement, given that the Departing Trustees have been successful to a legitimate claim to a portion of the Settlement Monies and given that the Mangat and Singh's monies have been held in Trust in Mr. LaFramboise's account, the interest accrued on the Settlement Monies to the date of payout shall be divided proportionally in accordance with the success of both groups.

Payment of the Accountant 's fees to testify

[158] The parties agree that the fees of the Accountant to attend at trial to testify ($6,000 plus HST) is to be paid out of the Settlement Monies and apportioned 60% to the Departing Trustees and 40% to the Remaining Trustees. So ordered.

CONCLUSION

[159] The Departing Trustees are entitled to $820,131.69 of the Settlement Monies together with 48% of the accrued interest.

[160] If there is a mathematical error in my calculation, I may be spoken to.

THE REMAINING FUNDS IN COURT

[161] The balance of the Settlement Monies shall remain with the Accountant for the Superior Court of Justice until further order of this court.

[162] Mangat and Singh shall bring a motion for payment out of court of the balance of the Settlement Monies. All parties who have an interest, contingent or otherwise, or claims to the balance of the Settlement Monies, whether directly or indirectly through Mangat, Singh Sikh Lehar or the Receiver of Sikh Lehar, shall be served with the return of the notice of motion with at least 7 days’ notice.

COSTS

[163] Any participant at the hearing seeking costs, shall file written submissions within 3 weeks of the release of this endorsement. The written submissions shall be limited to 5 pages, attaching any Offers, authorities and Cost Outline.

[164] Any participant against whom costs have been sought, shall provide responding submissions within 2 weeks after receipt of the written submissions. The responding submissions shall be limited to 5 pages with any Offers and authorities.

[165] There shall be no reply submissions without leave.

Ricchetti, J.

Date: May 7, 2018