Court File and Parties

Court File No.: CV-18-3345-000 Date: 2019-07-02

Superior Court of Justice

Ontario

Between: 2464675 ONTARIO INC., Applicant

• Amrita Mann, for the Applicants

And: 2305105 ONTARIO INC. and TEJWANT BAWA, Respondents

• Aryan Ziaie, for the Respondents

Heard: April 1, 2019

Reasons for Judgment

Fowler Byrne J.

[1] The Applicant has brought two motions before the court, both seeking an order finding the Respondents in contempt of the Order of Justice Bielby of September 14, 2018. In particular, the first motion seeks a finding that both Respondents are in contempt of paragraph 11 of said order. The second motion seeks a finding that the Respondent Tejwant Bawa is in contempt of paragraphs 4, 6 and 11 of said order. If this court finds such contempt, the Applicant seeks an order that the Respondents purge their contempt and pay a fine.

Background

[2] The Respondent 2305105 Ontario Inc. (“230”) owns and operates a retirement home in Peterborough, Ontario known as Kawartha Heights Retirement Living. The Applicant 2464675 Ontario Inc. (“246”), owns fifty percent of the shares of 230. 246 is controlled by its sole officer and director, Mr. Harmanjit Singh Walia. The Respondent Mr. Tejwant Bawa owns the other fifty percent of the shares of 230.

[3] The Applicant has alleged that despite a shareholders agreement directing that 246 and Mr. Bawa jointly manage the business, Mr. Bawa has, amongst other things, excluded Mr. Walia from decision making and has misappropriated funds from 230. As a result, the Applicant commenced this application seeking a number of remedies including the appointment of an auditor for 230, who was to report on the business affairs of the company since January 1, 2016.

[4] In the course of this application, the Applicant brought a motion seeking the appointment of an auditor and setting out a method of selecting a management company for their business.

[5] Despite Mr. Bawa seeking an adjournment of this motion, the relief was granted, and an order was made by Justice Bielby on September 14, 2018. For the purposes of this motion, the relevant provisions of the Bielby Order are as follows:

3. THIS COURT ORDERS that pursuant to Section 149(8) of the Business Corporations Act, R.S.O. 1990, Wadehra Professional Corporation (“the Auditor”) is hereby appointed to audit the financial affairs of the Corporation from Arpill [sic], 2015 to April 30, 2018 or such period as the Auditor may determine is advisable based on the results of the audit.

4. THIS COURT ORDERS that the parties shall produce and provide to the Auditor all Documents in their power, possession or control as requested by the Auditor.

5. THIS COURT ORDERS that the costs of the audit shall be paid by the Respondent, Tejwant Bawa, personally, without prejudice to either party to seek that the costs of the audit be paid by any one or more of the named parties in this proceedings.

6. THIS COURT ORDERS that pending the disposition or settlement of this Application or further Order of this Court, the Corporation shall make no transfers or payments, directly or indirectly, to any of the parties, or any related parties, affiliates or family members, without the consent of the other party.

Issues

[6] The issues to be determined are whether the Respondents are in breach of paragraphs 4, 6 or 11 of the Bielby Order, and if so, should they be found in contempt.

Law

[7] A contempt order to enforce an order requiring a person to do an act, other than the payment of money, or to abstain from doing an act, may be obtained only on motion to a judge in the proceeding in which the order to be enforced was made: r. 60.11(1) at the Rules of Civil Procedure.

[8] In order to make a finding of contempt, the moving party must establish the following elements beyond a reasonable doubt: (1) that the order alleged to have been breached states clearly and unequivocally what should and should not be done; (2) that the party who disobeyed the order must have actual knowledge of the order; and (3) that 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: Carey v. Laiken, 2015 SCC 17 at para. 32-35, Greenberg v. Nowack, 2016 ONCA 949 at 25-26, leave to appeal to SCC refused, 2017 CarswellOnt 8286.

[9] The contempt power is discretionary and the courts have consistently discouraged its routine use to obtain compliance with court orders. For example, where an alleged contemnor acted in good faith in taking reasonable steps to comply with the order, the judge entertaining a contempt motion generally retains some discretion to decline to make a finding of contempt: Carey at para. 35-37.

[10] If there is any reasonable doubt as to whether the respondent is in contempt, I must find that there is no contempt: Carey at para. 36.

Analysis

[11] Each allegation of contempt will be reviewed separately.

i. Payment of Management Fees in September, 2018

[12] The Applicant has alleged that the Respondents paid the sum of $10,170 to 9302930 Canada Inc., a company controlled by Mr. Bawa’s son, Parminder (Danny) Singh Bawa, contrary to paragraph 11 of the Bielby Order. This payment was a management fee of $9,000 plus H.S.T. which was paid monthly by 230 to this company.

[13] The Respondent maintained that the payment was issued on or about September 1, 2018 and therefore not subject to the court order. The Applicant takes the position that the payment was for management fees for the month of September, in advance, and at a minimum, should be paid back for the period after the Bielby Order.

[14] I do not find this payment was made in breach of the order of Justice Bielby, nor can the Respondents be found in contempt for making this payment. Carey requires that the party who disobeys the order must have actual knowledge of it and they must have disobeyed the order intentionally. Clearly, the Respondents could have no knowledge of an order that had not yet been made, and as a result, could not have intentionally breached the order by making the payment.

[15] I note that a pro rata portion of this amount was paid back on December 11, 2018. Given that there was no contempt in making the original payment, there was nothing to purge. This amount will have to be accounted for in the litigation as between the parties.

ii. Payment to Auditor

[16] The Applicants have alleged that contrary to paragraph 6 of the Bielby Order, the Respondents retained the auditor using company funds. They produced a copy of a cheque in the sum of $15,000, payable to Chaitons LLP, the Respondent’s lawyers, as evidence of such, which cheque was drawn from the account of 2548171 Ontario Inc (“254”).

[17] According to paragraph 22 of Mr. Walia’s affidavit of February 5, 2019, and Exhibit “O” thereto, 254 is owned by Gauravtej Singh Bawa, who is the personal Respondent’s son. Accordingly, on the evidence before me it appears that the money was taken from an account controlled by the personal Respondent’s son to pay the auditor. While the funds controlled by 254 may belong to 230 indirectly or otherwise, this has not been established beyond a reasonable doubt.

[18] On or about November 1, 2018, Mr. Bawa paid back the sum of $15,000 to the company, albeit to the bank account of 230. The Applicant states that this was paid to purge Mr. Bawa’s contempt. Given that I could not determine with any certainty that the original payment was a breach of the Bielby Order, let alone an act of contempt, this payment should be accounted for in the main litigation.

iii. Payments to Gauravtej Singh Bawa

[19] The Applicant has alleged that Mr. Bawa directed 230 to pay the sum of $3,076.92 to his son Gauravtej Singh Bawa on September 19, 2018, October 5, 2018 and October 19, 2018, contrary to paragraph 11 of the Bielby Order.

[20] After a demand was made for repayment, the Respondents repaid two of these payments for a total of $6,153.84, without prejudice to their right to claim the amount in the litigation. No other explanation was given except that the Respondents believed they should be paid for their management services, especially for those provided prior to the Bielby Order.

[21] Paragraph 11 of the Bielby Order is clear that 230 was to make no payment or transfer, directly or indirectly to any of the parties, related parties, affiliates or family members without the consent of the other party. The Respondents were aware of the Bielby Order and never claimed otherwise. The payments were made without the consent of the Applicant, which I find was done intentionally.

[22] I have no difficulty finding that the latter two payments were acts of contempt on the part of Tejwant Bawa. Given that the sum of $6,153.84 was repaid to the company, this contempt has been purged.

[23] With respect to the first payment, this is an appropriate instance in which the court should exercise its discretion and decline to make a finding of contempt. While the first payment made on September 19, 2018 was also made in breach of the Bielby Order, it was for services rendered that ended on or around the day of the Bielby order. This payment may have been the Respondent’s good faith effort to comply with the Bielby Order for the period following September 14, 2018, but conduct their affairs as usual for the period before. In any event, I have not satisfied beyond a reasonable doubt that the Respondents intentionally and purposively attempted to defy the Bielby Order when this payment was made.

iv. December 6, 2018 Payment

[24] On December 6, 2018, Bawa directed 230 to pay the sum of $2,000 to retain the legal services of Ned Nolan. Mr. Nolan confirmed that he was retained by Garry Bawa on behalf of 2548171 Ontario Inc. (“254”) to respond to a human rights claim made by an employee of the retirement home. While 230 was the legal owner of the retirement home, 254 was the legal employer of the employees.

[25] While this payment may have been a breach of the Bielby Order, I am not prepared to find that the Respondents were in contempt by making this payment. First of all, the payment was made to a lawyer, not to any of the parties, or their families. While the payment was made on behalf of company owned by Garry Bawa, it was a legitimate expense associated with running the business. The division of roles between the various companies is not laid out clearly in the materials. While 254 appears to be a management company owned by Garry Bawa, Mr. Walia swears in his affidavit of February 2, 2019, that 230 owns and operates the retirement home. The inter-relationship between 230 and 254 is unclear. In addition, the human rights claim was made against the retirement home, whether or not correctly named. 230 may have faced legal exposure as a result. Accordingly, I am not convinced beyond a reasonable doubt that this is a payment indirectly to, or for the benefit of a family member of one of the parties, or that the payment was made with the intention of violating the Bielby Order.

v. December 7, 2018 Payment

[26] On December 7 2018 the Respondent paid himself $1,928.09 from the company for the purposes of reimbursing his son. The Applicant maintains that it did not consent to this payment.

[27] In response, the Respondent’s produced an e-mail from Mr. Walia dated November 26, 2018 wherein he stated that going forward, individuals could incur business expenses on their credit cards and then be reimbursed by the business upon production of receipts. Around this time, Garry Bawa incurred expenses, or reimbursed other employees for expenses they incurred, and then was reimbursed by the company for these expenses on December 7, 2018. Receipts were provided to substantiate the amounts.

[28] I am unable to determine with any certainty that this payment constituted a breach of the Bielby Order. Even if such certainty was provided, I am unable to find that this payment was made in contempt of the Bielby Order. The Respondents understood that they had the consent of Mr. Walia as a result of his e-mail. As a result, this is not an intentional breach of the order. Mr. Walia has tried to draw a distinction between his “consent” and his “proposal” in his e-mail. I do not find this distinction sufficient prove that this breach was an intentional breach beyond a reasonable doubt.

[29] I note that the sum of $3,802.08 was paid back to the company of December 11, 2018. This was sufficient in any event to cover this payment and other breaches.

vi. December 12, 2018 Payment

[30] On December 12, 2018, the respondent paid $1,614.80 to his son Guaravtej Bawa as a “refund” from the corporation. The Applicant did not consent to this payment.

[31] The Respondents have advised that this was to correct an overpayment that Mr. Garry Bawa made to the company at the beginning of November, 2018. As indicated above, Garry Bawa received three payments of $3,076.92, but he paid back two of them, in the sum of $6,153.84. It appears that Garry Bawa only received a net pay of $2,269.52 each pay period, so Danny Bawa reimbursed Garry Bawa the difference between Garry Bawa’s gross pay and his net pay, for two pay periods.

[32] This payment was made without the Applicant’s consent, and according was made in breach of the Bielby Order. I am not prepared though to find that this payment was made in contempt of the Bielby order. While it is clear that this “refund” was paid without the consent of the Applicant, and that the restriction the Bielby Order was known, this payment was not made with the intention of violating the Bielby Order. It was discovered that Garry Bawa did pay back too much, and an adjustment was made. Although it would have been prudent to seek the Applicant’s consent beforehand, so as to avoid this motion, I am not prepared to find contempt in this instance. As indicated in Carey, where an alleged contemnor acted in good faith in taking reasonable steps to comply with the order, the judge entertaining a contempt motion generally retains some discretion to decline to make a finding of contempt. This exercise of discretion is appropriate in these circumstances.

vii. Production to the Auditor

[33] The Applicant has alleged that the audited financial statement were not prepared as a result of the Respondent’s failure to provide the necessary documents to the auditor on a timely basis. A letter from the Auditor dated February 1, 2019 indicated to 230 that there was significant information and supporting documentation that had been requested but not provided.

[34] The Respondents have stated that they have provided all that has been asked of them, and in any event, audited financial statements were not required by their lender. The Applicant replies that their lender was expecting audited statements.

[35] As indicated in Carey, the contempt power is discretionary and should not be routinely used to enforce court orders. It is an enforcement of last resort rather than first resort (para. 36). Given the punitive nature of the penalties associated with contempt, the court must be convinced, beyond a reasonable doubt, of the contempt.

[36] I am unable to find on the record before me that the Respondents are in contempt of para. 4 of the Bielby Order. While at some point there may have been a breach, it is unclear whether the breach remains outstanding. The evidence provided is general in nature. There are blanket statements by the individuals involved but no evidence from the auditor, no clear lists of what has been requested, what is required and what has not been responded to. It is not the obligation of the motions judge to sift through various correspondence in order to determine what was asked, what was answered and what is ignored. When a party seeks a finding of contempt, the supporting evidence should be clear, cogent and compelling, showing contempt beyond a reasonable doubt. Sufficient supporting evidence has not been provided in this instance.

Conclusion

[37] Based on the foregoing, I made the following orders:

a) I find that the Respondent Tejwant Bawa is in contempt of the Order of Justice Bielby of September 14, 2018 by making two payroll payments to Garry Bawa, on or about October 5, 2018 and on or about October 19, 2018, which contempt has been purged;

b) Given that the contempt has been purged, no additional penalty shall be levied as against the Respondents;

c) The parties are encouraged to resolve the issue of costs as between themselves. If counsel are not able to agree on costs, the Applicant shall serve and file its written costs submissions, limited to two pages, single sided, double spaced, exclusive of a Costs Outline and case law, no later than 4:30 p.m. on July 15, 2019; the Respondents shall serve and file their responding materials, with the same restrictions as to length and content, no later than 4:30 p.m. on July 29, 2019; any Reply submissions, with the same length and content restrictions, shall be served and filed no later than 4:30 p.m. on August 6, 2019;

d) The remainder of the two motions are dismissed.

Fowler Byrne J.

Released: July 2, 2019