Jashseep Riar et al. v. Moninder Khudal et al., 2021 ONSC 3919
COURT FILE NO.: CV-21-00655815-00CL
DATE: 20210531
SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: JASHSEEP RIAR et al., Plaintiffs
AND:
MONINDER KHUDAL a.k.a. MONINDER S. KHUDAL et al., Defendants
BEFORE: L.A. Pattillo J.
COUNSEL: Nancy J. Tourgis and Rajiv Joshi, for the Defendant/Moving Party 2613497 Ontario Inc.
Kevin D. Sherkin, Eric Sherkin and Madeleine Dusseault, for the Plaintiffs/Responding Parties.
HEARD: May 27, 2021
ENDORSEMENT
[1] On September 17, 2020, Myers J. issued a Mareva injunction order (the “Order”) against the defendant Moninder Khudal, his family members and several the defendant companies including the defendant 2613497 Ontario Inc. (“261”). The Order also granted Certificates of Pending Litigation (“CPL”) against various properties owned by the defendant corporations, including 1107 and 1119 Queen Street West, Brampton (the “Properties”), which are owned by 261.
[2] 261 now moves pursuant to r. 37.14 to set aside the Order against it and discharge the CPL on the Properties on the basis that it was obtained without notice and the plaintiffs did not make full and fair disclosure on the motion of all material facts. It further submits the plaintiffs failed to meet the test for a Mareva injunction in that they did not raise a prima facie case against 261, either at the time of the motion or in the statement of claim and there is no evidence of dissipation of assets by 261. Finally, 261 submits the plaintiffs have not claimed or evidenced an interest in the Properties that would entitle them to a CPL.
[3] The plaintiffs have also brought a motion to amend their statement of claim to add additional plaintiffs and additional defendants and claim CPLs against two parcels of land in Innisfil Township.
[4] The plaintiffs allege that Mr. Khudal, his family and associates fraudulently misappropriated approximately $45 million from the plaintiffs utilizing the defendant corporations to carry out the fraud. They allege Mr. Khudal and his associates were engaged in a Ponzi scheme.
[5] 261 was incorporated by Mr. Khudal as Diam Queen Property Inc. on January 3, 2018. Mr. Khudal was the sole shareholder and director. Diam Queen acquired the Properties on January 3, 2018 and February 27, 2020 for a total purchase price of $2.9 million. The plaintiffs allege the monies used to purchase the Properties came from them through a complicated series of transactions.
[6] In February 2020, Mr. Mukesh Gupta, who had various business dealings with Mr. Khudal dating back to 2015, took over ownership of Diam Queen from Mr. Kuhdal pursuant to an agreement whereby Mr. Gupta assumed the current outstanding debt and any outstanding liabilities and work in progress. Mr. Gupta purchased 100 shares from treasury, and it is alleged that Mr. Kuhdal surrendered his shares and resigned from the corporation. The plaintiffs take issue with the bona fides of the transaction. Mr. Gupta subsequently became the corporation’s only director and on March 11, 2020 Diam Queen changed its name to 261.
[7] The plaintiffs issued a Notice of Action on June 24, 2020 and served their notice of motion and the motion record for the Mareva order on Mr. Khudal’s then-counsel, Chand Snider LLP on July 9, 2020. The motion was case managed by Justice Davies. At the first case conference on July 10, 2020, a timetable leading to a motion date of July 29, 2020 was set. Following the conference, plaintiffs’ counsel provided the court with a list of all counsel who appeared together with their contact information and who they represented. The list noted that Pradeep Chand and Murray Snider from Chand Snider LLP represented several of the defendants, including 261.
[8] Subsequent case conferences were held on July 14, 24 and August 12, 2020. At the August 12th case conference, the timetable was amended, and the hearing date rescheduled to September 17, 2020. The endorsements issued by Justice Davies after each case conference noted the counsel attending and the parties they represented. In each endorsement, 261 is shown as being represented by Messrs. Chand and Snider. 261 is also shown in the list of defendants for whom no one was appearing.
[9] The responding motion record was filed by Chand Snider LLP on behalf of Mr. Khudal and several the other defendants, one of whom was 261, on July 20, 2020.
[10] On the return of the motion on September 17, 2020, the participants sheet filed with the court listed Mr. Chand and Karandeep Lidder from Chand Snider LLP representing the Responding Parties/Defendants, which included 261, and Mr. Chand as the counsel who would be making submissions on their behalf.
[11] In his endorsement dated September 21, 2020 granting the Order, although the plaintiffs, in their factum, state that the issue of 261 not having notice was raised at the hearing, Myers J. makes no mention of it.
[12] Following Myers J.’s decision, the parties appeared before him on September 25, 2020 for the purpose of settling the Order. The fact that certain parties to the Order had not received notice of the hearing was again raised before Myers J. by responding parties’ counsel. In his endorsement, Myers J. stated, in part:
Mr. Chand argues that the order includes parties who were not represented at the hearing. During the hearing Mr. Chand argued that several Khudal companies were not properly before the Court. As Mr. Khudal participated in the hearing of the injunction motion and today, I was and am satisfied that all defendants had proper notice. If anyone believes the contrary, Rule 37.14 remains available as always.
[13] 261 submits that it never received notice of the Mareva motion or the hearing before Myers J. There is no issue that 261 was never personally served with the motion material. The plaintiffs served it on Mr. Chand who they understood was acting for Mr. Khudal, his family and several the corporate defendants.
[14] 261 submits that it should have been served with the motion material personally given plaintiffs’ counsel had a corporate search of 261 which clearly showed that Mr. Gupta was the sole officer and director of the company and Mr. Khudal was not involved. It also provided the address for service. Given Mr. Khudal’s prior involvement in 261 and the plaintiffs’ allegation that 261 was involved in the fraud, service on Mr. Chand was not wrong. If Mr. Chand and Mr. Snider had no instructions to act for 261, they should have advised plaintiffs’ counsel of that fact. They did not. Rather, they appeared at the case conferences on behalf of 261, among others, filed responding material on the motion on 261’s behalf and represented it at the hearing of the motion.
[15] 261 points to the Case Conference endorsements which list 261 as being both represented by Messrs. Chand and Snider and being one of the parties not represented as evidence that it was not represented. Given the evidence of Chand Snider LLP’s representation of 261 throughout, the more likely explanation of the inconsistency is that an error was made in the initial listing of counsel and parties and that listing (along with the error) was repeated at the start of each subsequent endorsement.
[16] 261 also relies on the above comment by Myers J. in his September 25, 2020 endorsement concerning the availability of r. 37.14 as support for its motion. Myers J. is clear that he considers all defendants to have received notice. By referring to that rule, I consider he is simply noting a remedy if any of the defendants to the Order can establish otherwise.
[17] Based on their involvement in the motion on behalf of 261 as set out above, I am satisfied that Chand Snider LLP were the lawyers of record for 261 through to at least the hearing of the motion. Accordingly, 261 had notice of the Mareva motion and r. 37.14 does not apply.
[18] Considering my finding that 261 had notice of the Mareva motion, I have no jurisdiction to deal with the balance of the issues raised by it on this motion. The issue of full and fair disclosure is applicable to motions without notice (r. 39.01(6)) which, as I have found, this was not. The remaining issues concerning the failure to apply the correct test for a Mareva injunction or for the CPL are more properly the subject of an appeal rather than a motion to a single judge.
[19] 261’s motion is therefore dismissed.
[20] The time allocated to hear 261’s motion did not permit the plaintiffs’ motion to amend its statement of claim and obtain CPLs to be heard. Accordingly, it is adjourned to a date to be agreed upon by counsel and booked through the Commercial List Office.
[21] As the plaintiffs were successful on the motion, they are entitled to their costs on a partial indemnity basis. In that regard, they have filed a Costs Outline claiming costs incurred on a partial indemnity basis of $63,283.62 in total. In contrast, 261’s Costs Outline claims partial indemnity costs of $42,994.46 in total.
[22] I have difficulty with the amount the plaintiffs claimed costs for several reasons. The motion was a half-day and the issues raised were straightforward. 261’s motion was a comeback to the Mareva motion made on notice and involved only one of the many defendants against whom the Mareva was obtained. Further, given plaintiffs’ counsel’s involvement in the prior Mareva motion, I consider the hours spent by them on this motion to be excessive. While the hours are like those reported by 261’s counsel, the latter were required to get up to speed from the beginning whereas plaintiffs’ counsel have been involved in the Mareva motion from its outset and before. I am also of the view given four counsel were involved for the plaintiffs, there is also some duplication in the time claimed.
[23] In my view, having regard to the issues and based on the above comments, I consider a fair and reasonable partial indemnity award of costs to the plaintiffs within the reasonable contemplation of 261 to be $35,000 in total. Payable forthwith.
L.A. Pattillo J.
Released: May 31, 2021