COURT FILE NO.: CV-12-451701

DATE: 20211102

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

1417217 ONTARIO INC. and MUSA SULEMAN

Plaintiffs

– and –

RIVER TRAIL ESTATES INC., 1639395 ONTARIO INC., REGALCRAFT HOMES INC., ESTATE OF MADAN SHARMA, REKHA SHARMA and MEENA SHARMA

Defendants

Alnaz I. Jiwa, for the Plaintiffs

Kenneth Prehogan, Kayla Theeuwen and Max Skrow, for the Defendants

HEARD: Sept 14-25, Oct 2, Oct 19, Oct 20, Oct 21, Oct 22, November 18-20, 2020, and March 2, 2021

PAPAGEORGIOU J.

A. Introduction and Overview.. 2

B. The Witnesses, the Evidentiary Record, and the Trial 3

C. Business Structure of the Joint Venture. 7

D. Division of Profits. 9

E. Division of Joint Venture Responsibilities Between Mr. Suleman and Mr. Sharma. 10

F. Financial Affairs/record keeping: 10

G. Other Accounting Records. 12

H. The Projects. 13

I. Mutual Grievances. 13

J. The Winding Up and the End of the Joint Venture. 15

K. Plaintiffs’ Claim: Unpaid Investment in Joint Venture: $5,358,210.69. 17

L. The Plaintiffs’ Claims: Overpaid Management Fees. 17

M. The Plaintiffs’ Claim: Proceeds of Sale of River Trail and Black Creek. 21

1. The River Trail and Black Creek Pleadings. 21

2. The Black Creek Property Proceeds. 23

N. Fiduciary duty. 24

O. Lifting the Corporate Veil 25

P. Negligence. 30

Q. Highbury Estate. 30

R. Defendants’ Counterclaim.. 30

1. Oppression Remedy. 30

2. Alleged Misappropriation of Revenues. 31

S. The Failure to Maintain Books and Records. 40

T. The Alleged Financial Accounting Discrepancies. 40

U. The Necessity for an Accounting. 47

V. Conclusion. 49

A. Introduction and Overview

[1] This litigation arises out of a defunct Joint Venture between the plaintiff, Musa Suleman, who was 76 years old at the time of the trial, and the deceased Madan Sharma, who is now represented by the Estate of Madan Sharma. Each side of the Joint Venture claims that the other has been overpaid and that there have been misappropriations by the other. The plaintiffs’ major claim is for approximately $5.4 million. The defendant Meena Sharma, in her capacity as Trustee of the Estate of Madan Sharma has counterclaimed. Pursuant to s.248(1) of the Ontario Business Corporations Act[^1], the Estate alleges that the plaintiffs conducted the business of the Joint Venture in a manner that is oppressive. The Estate alleges misappropriations and a failure to maintain corporate and accounting books and records, and requests either damages or an accounting.

[2] For the reasons that follow, I find that the Estate; the defendant Meena Sharma, who was Mr. Sharma’s daughter; the defendant Rekha Sharma, who was Mr. Sharma’s spouse and is Meena’s mother; and the defendant River Trail Estates Inc. are jointly and severally liable in the amount of $1,586,584.83 in respect of Joint Venture proceeds of sale which were misdirected to a non-Joint Venture company.

[3] This judgment award is payable to 1417217 Ontario Inc., which was the main Joint Venture corporation, and not to Mr. Suleman, who has only a 1/3 interest in the profits of the Joint Venture.

[4] Further, I find that as of January 2008, Mr. Sharma had been overpaid management fees in the amount of $2,424,712 and that Mr. Suleman had been overpaid management fees in the amount of $1,368,195. The date is significant because there needs to be a reconciliation of the profits and management fees from after January 2008 up to when the Joint Venture completed being wound-up.

[5] I am dismissing the Estate of Madan Sharma’s claim that it is entitled to an oppression remedy on the basis that Mr. Suleman has misappropriated any Joint Venture funds.

[6] However, I am satisfied that the state of Mr. Suleman’s post-January 2008 record keeping creates a circumstance of prejudice which is sufficient to constitute oppression. As will be seen, the Estate has apparently lost the major Joint Venture financial documents, which were in its possession. All that remains for the post-January 2008 time period in terms of financial analysis are Mr. Suleman’s records. The Estate has raised many valid discrepancies in Mr. Suleman’s analysis.

[7] I, therefore, order an accounting before an Associate Judge pursuant to Rules 54 and 55 of the Rules of Civil Procedure[^2] to determine the final state of accounts of the Joint Venture corporation, the plaintiff 1417217 Ontario Inc. This accounting will also ultimately address amounts either owed to Mr. Suleman or Mr. Sharma in respect of profits, or owed by them as a result of overpayment of management fees.

[8] All other claims advanced by both sides are dismissed.

B. The Witnesses, the Evidentiary Record, and the Trial

[9] In or around 2000, Madan Sharma (“Mr. Sharma”) and Musa Suleman (“Mr. Suleman”) entered into a Joint Venture to build and sell residential homes. There is no dispute that the main Joint Venture corporation was the plaintiff 1417217 Ontario Inc., which was incorporated to act as the legal entity responsible for the Joint Venture’s operations. 1417217 Ontario owned the Joint Venture bank account, received all revenues and paid all expenses. Mr. Sharma initially incorporated the company, but both Mr. Sharma and Mr. Suleman were the shareholders and directors of 1417217 Ontario’s operations.

[10] Mr. Suleman is a Certified Public Accountant (“CPA”) with experience in financing construction projects. Mr. Suleman sued for himself and for the plaintiff 1417217 Ontario.

[11] Mr. Sharma, who as noted above is now deceased, was a civil engineer with significant experience developing real estate. For many years, he constructed commercial, industrial and residential buildings, arenas and warehouses. His wife, the defendant Rekha Sharma (“Rekha”), testified that he was very good at math. His daughter, the defendant Meena Sharma (“Meena”) testified that Mr. Sharma was “very, very sharp with his numbers.”

[12] Mr. Suleman and his sons, Naheel Suleman (“Naheel”) and Rahim Suleman (“Rahim”), were the only witness who had any first-hand knowledge of the terms of the Joint Venture or how it operated. Naheel and Rahim are both Chartered Accountants. Naheel acted as Vice President and Controller for the Joint Venture from 2000 until 2005. He is a Charted Accountant (“CA”) and a CPA.

[13] Rahim has been a CA and CPA since 2000. Rahim was the VP of Finance and Controller of the Joint Venture beginning in 2007. Rahim has had a variety of senior positions with various companies doing forensic auditing, including KPMG and H&A Forensic Accounting. He has also worked as a corporate controller at AG Simpson, a $400 million automotive manufacturer. He has had many other senior positions within corporations.

[14] Naheel and Rahim’s evidence for the plaintiffs was consistent and clear. They were heavily cross-examined and they gave consistent answers. They also admitted facts which were unhelpful to the plaintiffs even though Mr. Suleman is their father and is exposed to liability on the counterclaim. The Suleman brothers conceded that certain entries in their father’s trial balances could not have been for the items that he recorded.

[15] Meena and Rekha were the only witnesses who testified for the defendants.

[16] Meena has an MBA from the Schulich School of Business, but she is not an accountant. She worked full time for Regalcraft, one of the Joint Venture’s associated companies, from its Millcreek premises. Meena began as a client service manager, but then moved into sales and marketing. After Mr. Sharma passed away, Meena became the Trustee of his estate (the “Estate”). Meena had no personal knowledge of the Joint Venture arrangements and was not involved in the accounting of the Joint Venture, apart from conversations she had, mostly after she became Trustee.

[17] Rekha was involved in sales, and she also had no involvement in the accounting systems. She did not attend any meetings with Mr. Suleman and Mr. Sharma (apart from at the end when there was a dispute over the Joint Venture’s final reconciliation), and she was not involved in any discussions about what properties to purchase and develop for the Joint Venture.

[18] There were many other employees, including accountants/book-keepers who worked with Mr. Sharma, Meena, and Rekha. These accountants/book-keepers would have had first-hand knowledge about the affairs of the Joint Venture and the way it operated. There was no evidence that these witnesses were not available to attend the trial and support the defendants’ claims and counterclaim. These witnesses, however, were not called. Even though this Joint Venture lasted almost twelve years, involved the sales of hundreds of homes at seven projects with approximately $164 million in revenue, and even though there were over thirty boxes of financial records, no one called an expert to address any accounting issues.

[19] Given the lack of direct involvement or observation, I found the defendants’ evidence from Meena and Rekha about the terms of the Joint Venture agreement and the way it operated to be of minimal assistance. As well, I found Meena and Rekha to be not credible because of improbable evidence they gave during the trial about allegedly blacked-out transactions on bank statements and the loss of all the Joint Venture’s main accounting records, as I will discuss further below. Finally, I also had concerns about Meena’s credibility because she had been admittedly dishonest with Mr. Suleman regarding the way certain proceeds of sale would be held by her at the relevant time.

[20] The defendants strenuously argue that Mr. Suleman was not credible or reliable for a number of reasons. First, they assert that he was not credible because he did not produce written agreements with individual investors. He was continually asked to confirm that he had no promissory notes, no IOUs and no other documents. In my view, this is not persuasive to discredit Mr. Suleman. The Joint Venture agreement was never reduced to writing by anyone. While it began with a simple oral agreement as to the profit split, it evolved over time as new issues arose and/or new projects were conceived.

[21] The terms of this informal arrangement can mostly be inferred from the manner in which it operated. In these reasons, I refer to what I have concluded were the evolving terms of their arrangement as the “Joint Venture Agreement.”

[22] Second, the defendants assert that Mr. Suleman was not credible because the defendants were successful in impeaching his evidence based on inconsistencies in what he said in 2013. However, the impeachment was mostly over immaterial details that he could not recall. For example, prior to trial he said he gave Exhibit 6 to the defendants at the January 2012 meeting, but then at trial he agreed that he gave it to them shortly before the meeting. Given the duration and scope of this proceeding, and the passage of time, I am not surprised by this inconsistency or others, and it does not make Mr. Suleman unbelievable.

[23] Third, the defendants rely on his inability to explain some of the accounting entries. Once again, I do not find it surprising that Mr. Suleman, who was 76 years old, had difficulty answering questions about particular transactions. Most of the discrepancies alleged at trial were never pleaded before and were plucked from thousands of entries in financial records from a period spanning twelve years. Some transactions occurred almost twenty years ago.

[24] He was asked to cross-reference numerous historical documents including statements of adjustment, journal entries, bank statements, cheques, his trial balances, etc. This questioning often involved finding one document within a package of 30 or 40 unnumbered pages, finding a line item, and then cross-referencing that to other documents with the same transaction, which similarly required finding the document and the line item. It was a painstaking process. Many times, when Mr. Suleman was asked about inconsistencies between journal entries, GST on sales, and what he recorded on his trial balance, he simply had no answer or could not answer because he did not have the Joint Venture’s main accounting records. As I will explain, GEAC was the primary accounting system for the Joint Venture. He said: “If the GEAC made a mistake, we make a mistake.” Then, after he gave this evidence, for the first time at trial, the defendants claimed that all GEAC documents have been lost. Therefore, through no fault of his own, Mr. Suleman’s journal entries cannot be verified against source documents.

[25] Even though he had difficulty with some of the accounting entries, Mr. Suleman conceded that there were entries in his records that did not make sense. He explained that “I’m getting old so my memory might go down.” He also explained that he sometimes moved money around when projects needed money; he did not always reflect the correct name for some of the expenses or entries in the financial records. In my view, he was endeavoring to tell the truth and was sincere, although confused at times.[^3]

[26] I agree with the defendants that when it comes to Mr. Suleman’s evidence regarding particular accounting entries, he was not particularly reliable because he did have such difficulty remembering and explaining in many instances. But I did not think he was lying, trying to obfuscate events, or creating false transactions to support his claim. I listened to him for almost five days. He displayed extreme upset at any suggestion that he would make false records, or “cook the books,” as alleged. He was trying to tell the truth and assist the court within a process that was very cumbersome about issues that occurred many years ago.

[27] I find that Mr. Suleman was somewhat disorganized, made some mistakes in his records as to how he referenced things, and then did his best to fix them after the fact. Whether what he did was appropriate and accurate is impossible to determine on the record before me. However, when it came to remembering the overall Joint Venture arrangement and his dealings with Mr. Sharma, I found his evidence to be generally internally consistent, consistent with contemporaneous documents, and most importantly, consistent with the candid and cogent evidence given by Naheel and Rahim about the way the Joint Venture operated. I add that because I have concerns about Mr. Suleman’s reliability, where his evidence conflicts with Rahim or Naheel’s, I prefer Rahim or Naheel’s.

[28] I have considered section 13 of the Evidence Act[^4], which provides that in an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence. The corroboration required by section 13 is only with respect to material facts or issues. It can be either direct or circumstantial. It can consist of a single piece of evidence, or several pieces considered cumulatively. It can be evidence of active steps taken by the deceased or of the lack of steps taken that would be otherwise expected of him. It can consist of documentary corroboration or witness corroboration.[^5]

[29] I find that for the most part, Mr. Suleman’s evidence regarding the terms of the Joint Venture and the manner in which it operated is corroborated by Rahim and Naheel’s evidence, the documentary evidence, as well as evidence of actions which Mr. Sharma took and those he never took. I have noted when Mr. Suleman’s testimony is not corroborated on a material issue or fact, and accordingly, where section 13 precludes any findings on the basis of Mr. Suleman’s sole evidence as to what Mr. Sharma may or may not have said or done.

[30] Section 13 also applies to Meena’s testimony in respect of the Estate’s counterclaim.[^6] However, my concern with Meena’s evidence related to the counterclaim is not because of section 13. Had I found her approach and evidence persuasive, I would have also found it to be corroborated by the documents she referred to. However, as will be seen, I did not find her evidence persuasive on the Estate’s counterclaim.

[31] The trial was scheduled to last ten days but lasted more than three weeks, with final submissions not being made until March 3, 2021. The case was far more complex than anyone had anticipated when it was scheduled. The plaintiffs’ trial documentary brief comprised 1,034 pages. The defendants’ trial documentary brief comprised 1,278 pages, and the defendants instructed Mr. Suleman to bring his 30 boxes of productions to court.

C. Business Structure of the Joint Venture

[32] As noted above, the main Joint Venture corporation was the plaintiff 1417217 Ontario. Another significant associated corporation was Regalcraft Homes Inc. (“Regalcraft”), which was the builder. This was Mr. Sharma’s corporation.

[33] Rekha testified that Mr. Sharma relied upon Mr. Suleman to raise financing for the Joint Venture and that Mr. Sharma did not invest any of his personal funds into the Joint Venture apart from rolling profits from previous projects into new ones. Indeed, none of the defendants ever invested their own money in the Joint Venture.

[34] Between 2000 and 2012, the Joint Venture purchased several properties upon which it constructed and sold residential homes. There were seven projects in total comprising over 400 homes and generating over $164 million in revenues in the twelve years of the Joint Venture’s operations.

[35] Associated corporations provided management services, paid overhead and other expenses, organized the financing for the Joint Venture, and held title to Joint Venture properties. The arrangements with these corporations were informal and not in writing.

[36] The parties agreed that either Mr. Suleman or Mr. Sharma would be a director of each associated Joint Venture corporation, and if they could not be, then one of their associates or family members would be. Rekha acknowledged that Mr. Sharma used his family members as nominee directors, officers, or shareholders.

[37] Mr. Suleman and Mr. Sharma incorporated a separate corporation to own the land for each project, with the exception of the first project, Markham Trails, where the land was owned by 1417217 Ontario. This practice was to ensure that each project was creditor proof if some projects were profitable and others were not. I find as a fact that there was an implicit agreement which these holding companies had with 1417217 Ontario that they would hold any properties for the benefit of 1417217 Ontario—the main Joint Venture corporation through which all revenues and expenses flowed. This formed part of the Joint Venture Agreement. The Joint Venture could not have worked otherwise and any other interpretation is commercially unreasonable.

[38] I also find as a fact that Mr. Sharma and Mr. Suleman structured the boards and shareholdings of the corporations holding the Joint Venture land to ensure that these holding companies functioned in accordance with the informal Joint Venture Agreement. I find that when Mr. Suleman or Mr. Sharma or their appointees sat on these boards, they were expected and trusted to ensure that Joint Venture corporations which they controlled used Joint Venture property for Joint Venture purposes and/or the Joint Venture’s benefit, and that this also formed part of the Joint Venture Agreement. This did not create any conflict of duty and interest for such an appointee, because the holding companies were already implicitly obliged to hold such properties for the benefit of the Joint Venture. Having related parties as directors was an additional safeguard to protect Joint Venture properties.

[39] The joint venturers set up separate corporations to protect each project and to limit liability to third parties, not to protect themselves from each other.

[40] The following chart sets out the details of all the relevant corporations involved in the disputed issues and whether the corporation was owned by, or associated with, corporations owned by either Mr. Sharma or Mr. Suleman, or their family members.

Corporation	Function	Associated with or Owned by:
Regalcraft Homes Inc. (“Regalcraft”)	Building and selling homes.	Mr. Sharma
1417217 Ontario Inc.	The main Joint Venture corporation	Mr. Suleman & Mr. Sharma until 2008 when Mr. Sharma resigned as director. Mr. Sharma remained a shareholder.
1477729 Ontario Inc. (“Sovereign”)	Purchased equipment on behalf of the Joint Venture to be used in construction instead of renting it.	Mr. Suleman
1172698 Ontario Inc. (“SKS Associates Inc.”)	Managed the Joint Venture and received management fees for this.	Mr. Suleman
1477728 Ontario Inc. (“Regalcraft Services”)	Until 2007 it paid administrative fees for the Joint Venture for things like overhead not attributable to a particular construction project including rent, office staff salaries, hydro, telephone, computer systems, office supplies, and software.	Mr. Suleman
1367298 Ontario Inc.	Assumed the payment of administrative fees after 1477728 Ontario stopped.	Mr. Suleman
2127021 Ontario Inc. (“MSN”)	Assumed payment of administrative fees after 1367298 Ontario stopped.	Mr. Sharma
1507339 Ontario Inc.	Lending company to 1417217 Ontario. 1148153 Ontario lent investors’ money to 1507339 Ontario, which advanced it to 1417217 Ontario	Mr. Suleman
MNR Consulting & Management Inc.	Consulting company—this company was mentioned but it was never entirely clear what it did	Mr. Suleman
River Trail Estates Inc. (“River Trail Estates”)	Held the title to the River Trail property as defined below.	Mr. Sharma
1639395 Ontario Inc.	Held title to the Black Creek property as defined below.	Mr. Sharma

D. Division of Profits

[41] Mr. Suleman and Mr. Sharma agreed that investors in Joint Venture projects would be paid 8 % on their investment. The joint venturers agreed that they would share profits on the basis of 2/3 to Mr. Sharma and 1/3 to Mr. Suleman. Because profitability was not determined on an ongoing basis, the parties took management fees or draws throughout the venture. I will have more to say about the management fees below.

[42] As well, as already noted above, profits made in earlier projects were often rolled into subsequent projects. Mr. Suleman and Mr. Sharma agreed that at the end of the Joint Venture, once overall profitability could be determined, they would determine their respective shares taking into account payments already received. This was also part of the Joint Venture Agreement.

E. Division of Joint Venture Responsibilities Between Mr. Suleman and Mr. Sharma

[43] Construction: Mr. Sharma focused on building and selling the homes working out of Regalcraft’s business premises on Millcreek Drive (“Mr. Sharma’s Millcreek premises”).

[44] Financing: Mr. Suleman arranged financing for the projects and worked out of premises on Skyway Avenue. He had relationships with individual investors who advanced money to his investment company, 1148153 Ontario, who then advanced that money to 1507339 Ontario. 1507339 Ontario then advanced funds directly to 1417217 Ontario. 1148153 Ontario was not a part of the Joint Venture, but rather was operated independently by Mr. Suleman.

[45] As will become apparent from the discussion below, the defendants have spent considerable time and effort focusing on the necessity of examining the books and records of 1148153 Ontario and 1507339 Ontario, as well as the details of the individual investors. However, Naheel, who was the Vice President of Finance and controller for the Joint Venture from approximately 2000 to 2005, testified that the main investor in the Joint Venture was 1507339 Ontario, not the individual investors. His evidence is uncontradicted, since the defendants called no witnesses with firsthand evidence on this issue. In any event, the defendants’ focus on the details of individual investors makes little sense, as I shall explain later below.

[46] I find as a fact that the Joint Venture Agreement provided that 1507339 Ontario was the investor, not the individuals who lent money to Mr. Suleman’s corporations.

F. Financial Affairs/Record Keeping:

[47] There was considerable disagreement over which of the joint venturers was responsible for the overall financial health and record-keeping of the Joint Venture.

[48] Naheel testified, and I find as a fact, that the main Joint Venture records were held in software known as GEAC, which he set up at Mr. Sharma’s Millcreek premises. All invoices and cheques related to the Joint Venture were stored at Mr. Sharma’s Millcreek premises, where there was an entire room devoted to the records. Mr. Sharma had many accountants on site who assisted with keeping the accounts.

[49] Naheel described GEAC as a builder’s program used to pay building costs. The program kept detailed records of all payments by lot and unit. Regalcraft, as builder, would receive invoices for payment. Mr. Sharma’s staff would enter in the details of the expense, the payees, and the amount in the GEAC system. Regalcraft’s staff faxed Mr. Suleman this information on a daily basis together with information as to what the expense was for.

[50] Naheel explained that administrative fees and overhead expenses were not processed through GEAC. The administrative fees and overhead expenses included rent, staff salaries, insurance, office expenses, computer software and vehicle leasing. The administrative fees and overhead expenses would be processed at Mr. Sharma’s Millcreek premises. Someone at Regalcraft would write checks in respect of overhead expenses. Naheel testified that no invoices were ever generated for payment of overhead expenses. Rather, once or twice a month, they charged an administrative fee for each project, which was paid out of 1417217 Ontario’s bank account to the corporations handling the overhead expenses.

[51] These administrative fees were first paid by 1477728 Ontario and 1367298 Ontario, which were owned by Mr. Suleman. Later, overhead expenses were paid by 2127021 Ontario, also known as MSN, a corporation owned by Mr. Sharma.

[52] Naheel testified that in general, each of Mr. Sharma and Mr. Suleman would have to sign cheques in respect of building costs. However, at times, this would not be possible, and moneys would be electronically transferred from 1417217 Ontario’s account instead. Naheel also said that the dual signature rule did not apply to overhead and administrative costs and that Mr. Sharma and Mr. Suleman had an understanding that if funds had to be moved around, they could be moved as needed. Mr. Suleman and Mr. Sharma did not see the need for an invoice for overhead because these were internal transactions within the Joint Venture.

[53] Naheel worked out of Mr. Sharma’s Millcreek premises with Mr. Sharma two to three days every week, so he was generally accessible and could observe what was happening. There were many accountants on site assisting Mr. Sharma with accounting issues and reconciliations including someone named Mr. Malik, someone named Ann, an accounting clerk named Galli, and an accounting manager named Case. Naheel said the accountants were well trained and the procedures and controls operated like a fine-tuned machine.

[54] Naheel testified that all invoices and cheques were stored at Mr. Sharma’s Millcreek premises.

[55] When he questioned Naheel, defence counsel repeatedly focused on the absence of any written agreements in support of Naheel’s testimony as to how the Joint Venture operated, even though it is plain that the parties never entered into any specific written agreements about anything. Therefore, the absence of written agreements to support Naheel’s testimony on specific issues is not persuasive to diminish his testimony, which I find credible.

[56] Rahim testified that his responsibility at the Joint Venture was oversight of the financial affairs and the cash requirements from the perspective of investors, but not from the perspective of home building. He did not have direct access to GEAC but he could have screen shots and reports generated from GEAC.

[57] The majority of Rahim’s interactions with Mr. Sharma involved discussing the performance of Regalcraft—the building company. Like Naheel, Rahim testified that there was a considerable accounting staff working with Mr. Sharma and that they did a daily bank reconciliation, updating the records with all transactions that would have occurred.

[58] Rahim testified that when a bank reconciliation was done, people in Mr. Sharma’s office would be able to see any transactions, including deposits or payouts that were not recorded on GEAC.

[59] Mr. Suleman had no control over GEAC and indeed no access to it. As well, Rekha, who worked fulltime at Mr. Sharma’s Millcreek premises, testified that Mr. Suleman was rarely at Mr. Sharma’s Millcreek premises—perhaps once every six to eight weeks for a meeting in the evening.

[60] Mr. Suleman did have some accounting responsibilities, but he most certainly was not the only person responsible for the accounts of the Joint Venture. Because 1417217 Ontario’s bank account kept getting overdrawn, Mr. Suleman decided that he would start keeping his own records, which consisted of daily reconciliations on a cash basis to ensure there was enough money in the bank. As such, he prepared daily trial balances. Mr. Suleman also prepared the tax and GST returns as a director of 1417217 Ontario. He also eventually prepared some financial statements.

[61] Mr. Suleman testified that because they were paying out regular management fees/draws and rolling profits into subsequent ventures, he prepared income tax statements on the basis that all income and expenses were the same. These were his estimates because he did not know what the ultimate profitability of the Joint Venture would be. Mr. Suleman testified that this is how the construction industry operates, and I have nothing before me that contradicts this.

[62] While Meena suggested that the operation was like a Ponzi scheme, Mr. Sharma was a part of the way this Joint Venture was established. I find as a fact that while he was a director, Mr. Sharma would have been aware of all tax filings made, not made, or made late by Mr. Suleman.

[63] On the basis of the above, I also find as a fact that the Joint Venture Agreement implicitly provided that the main accounting records (as described by Rahim and Naheel) would be kept and maintained by Mr. Sharma at Mr. Sharma’s Millcreek premises.

[64] I also find as facts all of the evidence given by Rahim and Naheel, described above.

G. Other Accounting Records

[65] As noted above, Mr. Suleman had his own accounting system at his offices which operated on a cash basis.

[66] Staff at Mr. Sharma’s Millcreek premises would attach cheques to their corresponding invoices. They would prepare list of cheques that had been issued and send them to Mr. Suleman’s office by fax at the end of every day. Mr. Suleman or his staff would enter the details of these cheques into his accounting system at the end of each day and he would prepare trial balances for each project using this information. His staff also kept track of payroll for the Joint Venture as well as transactions with all of the investors.

[67] Mr. Suleman also received 1417217 Ontario’s bank statement at his offices. His staff would prepare photocopies of these bank statements and fax them to Mr. Sharma.

[68] At the end of each project, the parties would attend Mr. Sharma’s Millcreek premises to discuss the Joint Venture projects. The accounting presented at the meeting was from GEAC. Mr. Suleman says that he never prepared any financial reports on profitability at these meetings. Rahim worked at Mr. Sharma’s Millcreek premises, and Mr. Suleman considered it Rahim’s responsibility to prepare this analysis.

[69] Throughout the trial, defence counsel tried to suggest that there was something wrong with Mr. Suleman preparing his trial balances on a cash basis and then switching to an accrual basis for the purposes of the financial statements and statements of earnings which he ultimately prepared, described below. Many times, defence counsel suggested that this was inconsistent and wrong.

[70] Mr. Suleman explained that the reason his trial balances were prepared on a cash basis was that he wanted to ensure that there was sufficient cashflow for the projects. If one project had low cash, he would move money from another account to ensure that cheques did not bounce. The defendants called no evidence from any expert to support that there was anything wrong or unusual about his using cash accounting for this purpose, or that there is anything wrong with then switching to an accrual basis when preparing financial statements.

H. The Projects

[71] The Joint Venture completed the following seven residential developments from 2000 to 2009: Markham Homes, 9th Line, Oakville, Wismer I, Wismer II, Churchill I, and Churchill II.

[72] In addition, the Joint Venture purchased two properties in Fort Erie, which it intended to develop but did not: Black Creek and River Trail. As will be seen, these properties were ultimately sold and there is a dispute about the proceeds of sale.

I. Mutual Grievances

[73] In the early years, the Joint Venture built homes without many problems.

[74] In 2007, the parties held meetings where they decided they would complete any projects underway, but the Joint Venture would sell any lands that had been purchased but not yet developed—in particular, the Joint Venture would sell the River Trail and Black Creek properties.

[75] I find as a fact that when they agreed to sell River Trail and Black Creek, it was their implicit agreement that all proceeds would flow into 1417217 Ontario, just as all sales proceeds from the sales of homes had. Any other interpretation is commercially unreasonable.

[76] I note that even though Meena and Rekha testified at trial that Mr. Sharma wished to terminate the Joint Venture because of irregularities in its business operations, when cross-examined, Rekha admitted that it was Mr. Suleman who raised the issue of wishing to terminate the Joint Venture. She ultimately said it was a mutual decision.

[77] Rahim testified that in or around 2008, Mr. Sharma was working out of Mr. Sharma’s Millcreek premises on construction projects that were not part of the Joint Venture. Rahim concluded that the staff there were spending essentially all their time working on non-Joint Venture projects of Mr. Sharma’s. He said that there were times in July, August, September, and October of 2008 where they would have had uncomfortable discussions about the wages of all of Mr. Sharma’s Millcreek premises employees being charged to 1417217 Ontario, when a very, very small portion of people’s time was actually focused on its projects.

[78] In particular, Rahim testified that there was a payment of $100,000 as an administration fee to MSN, the corporation Mr. Sharma used to handle Regalcraft’s expenses, at a time when the Joint Venture was winding down and there should not have been such a large expense. Recall that Regalcraft was Mr. Sharma’s building company.

[79] Counsel for the defendants objected to Rahim giving this evidence on the basis it was hearsay, but Rahim testified that he was personally aware of two cheques in the amount of $60,000 and $40,000 paid out to MSN. Rahim asked for, but was denied, access to MSN’s books.

[80] Sometime in 2008, Rahim prepared an overall reconciliation of amounts paid and taken out of the Joint Venture. He concluded that Mr. Sharma had been overpaid by approximately $2.4 million and Mr. Suleman had also been overpaid by approximately $1.3 million.

[81] The parties met sometime in October 2008 when Rahim raised concerns that Sovereign’s assets (another Joint Venture company which primarily purchased construction equipment) were being used to support other projects of Mr. Sharma.

[82] Rahim told Mr. Sharma and Mr. Suleman that the net profits plus projected profits to close the projects was low enough that the funds distributed exceeded the profits and they would not have enough money to pay investors and profits. There was an urgent need to sell the Fort Erie lands.

[83] At the time, there was also a reported $3 million GST liability which Mr. Suleman thought could be settled for $1 million. Mr. Suleman testified that he showed Mr. Sharma the GST notices of assessment as well as Meena and Rekha, and this is backed up by emails[^7].

[84] On October 2, 2008, Mr. Sharma resigned from the board of 1417217 Ontario.

[85] Once again, I accept all of Rahim’s and Naheel’s evidence as to the progress of the Joint Venture.

[86] Rekha and Meena both testified that Mr. Sharma resigned because he was concerned about misappropriations. This would be inadmissible hearsay, but is admissible under the principled exception given that Mr. Sharma is deceased and cannot speak for himself.[^8]

[87] However, I do not find their evidence in this regard persuasive. Mr. Sharma did not write any letters of complaint. He did not send any emails. There is no evidence of any written inquiries that he or any of the multiple accountants and book-keepers working with him made of Mr. Suleman where they questioned any transactions. None of the accountants were called as witnesses on any of these concerns which Mr. Sharma allegedly expressed.

[88] Furthermore, Mr. Sharma’s detailed resignation letter makes no reference to any concerns that he had. It stated:

Dear Musa,

Please be advised that:

I’m hereby tendering my resignation as a director of 1417217 Ontario Inc. I also tender my resignation from any and all official capacities, if any, that may be considered or implied by virtue of my association with 1417217 Ontario Inc. since June 2000. I further withdraw your right to use the name RegalCraft Homes in conjunction with 1417217 Ontario Inc. and some other numbered companies which are operating as Regalcraft Homes. I know that you do not like to complete the minute books regularly. Notwithstanding that, should my name appear in any incorporation charters or documents, please remove the same immediately. As of today, I’m ending all relationships between Regalcraft Homes Inc. (and me personally) AND 1417217 Ontario Inc. (and any of your other project companies) By virtue of my resignation, I end also any and all responsibilities assumed or inherited on behalf of 1417217 Ontario Inc, particularly with respect to license & technical expertise. […]

[89] Notwithstanding his resignation, Mr. Sharma continued working for the Joint Venture until the last home was sold on May 9, 2009.

[90] Mr. Sharma suddenly passed away in October 2009. Meena became the Trustee of the Estate.

J. The Winding Up and the End of the Joint Venture

[91] After Mr. Sharma passed away, Mr. Suleman, Rahim, Meena, and Rekha met and decided that they would sell the remaining lands and wind down the projects.

[92] Once again, I find that it was their implicit agreement that any proceeds of sale would flow into 1417217 Ontario, just as all other sales proceeds had. Any other interpretation of what they agreed to do with the proceeds of sale of undeveloped Joint Venture land is commercially unreasonable.

[93] As the Joint Venture wound down, Rekha and Meena would send Mr. Suleman a list of expenses that required payment, and Mr. Suleman, who was the only signing officer left, would prepare the cheques and send them to Meena and Rekha to be input into the GEAC system. This was the same process followed prior to Mr. Sharma’s resignation and ultimate passing.

[94] In November 2009, Mr. Suleman approached Rekha and Meena demanding that they repay money overpaid to Mr. Sharma. Meena testified that she could not understand this, and she said to him: “You’ve put some numbers here and you’re telling me I have to pay this. You know, what—like, you don’t have any backup. There’s nothing here. These are just numbers.”

[95] Meanwhile, the parties continued to wind down the Joint Venture together, selling equipment and pursuing a letter of credit owed to the Joint Venture by the City of Mississauga. In that regard, there are contemporaneous emails from 2010 where Rekha discusses how she sold some equipment herself and placed the proceeds in Sovereign’s bank account. Mr. Suleman, Rekha and Meena appeared to be working together amicably during this period.

[96] On October 13, 2010, Mr. Suleman wrote to Rekha raising concerns that the property taxes for the Fort Erie properties had not been paid and that the City had given a deadline of September 30, 2010 or it would auction the land. He raised concerns that the Canada Revenue Agency (“CRA”) would trace outstanding GST to the Fort Erie properties.

[97] On June 24, 2011, Mr. Suleman forwarded to Meena demands from the CRA for $1.7 million.

[98] In November 2011, Mr. Suleman forwarded a four-page excel spreadsheet that purported to be a balance sheet for the “1417217 Ontario group of companies” to support his position that moneys were owed by the Estate.[^9]

[99] In January 2012, Mr. Suleman, Meena and Rekha attended a meeting with Shiraz Karmali, one of Mr. Suleman’s partners, and Carlos Salvadori, an accountant who worked at Regalcraft with Meena and Rekha. Meena testified that this meeting was scheduled because Mr. Suleman wanted to talk about the money that was owed to him because of alleged overpayments to Mr. Sharma. Meena testified that she also raised concerns at that time about a $500,000 letter of credit not shared with the Estate, sales proceeds of equipment not shared with the Estate, and the proceeds of the sale of the last two homes in the approximate amount of $600,000 not shared with the Estate. She also asked him for information on his individual investors.

[100] Mr. Suleman testified that Mr. Salvadori advised both sides that they had both taken excessive management fees. (I am not admitting this for the truth of its contents but as part of the narrative.) Mr. Suleman agreed to send Mr. Salvadori the bank statements, a bank reconciliation, and cancelled cheques to assist with a reconciliation. He said that GEAC had all of the building records and that he should use GEAC to cross-reference. Mr. Suleman says he sent these records to Mr. Salvadori, but Meena and Rekha says he never did.

[101] Because of their direct involvement in misdirecting Joint Venture proceeds (discussed below further) as well as improbable and not credible evidence they gave regarding allegedly blacked-out transactions on financial records and the loss of the GEAC records, I have found Meena and Rekha to not be credible, as stated above. Here, I add that there is no record of any email from Rekha, Meena or Carlos where they complain that Mr. Suleman failed to deliver these records as promised. Given their vigorous assertion that there was something wrong with his accounting, and the fact that they were communicating using email during the Joint Venture wind down, I find it improbable that they would have requested these records and not followed up if he did not forward them. As well, Mr. Salvadori was Meena and Rekha’s employee. They could have called him as a witness to testify as to whether he did receive such documents. Given that they did not, the only evidence I have on this issue is Mr. Suleman’s, which I accept. I find on a balance of probabilities that Mr. Suleman did send the records to Mr. Salvadori.

K. Plaintiffs’ Claim: Unpaid Investment in Joint Venture: $5,358,210.69

[102] Mr. Suleman claims the sum of $5,358,210.69, which he said he put into the Joint Venture. Mr. Suleman, however, did not provide sufficient evidence or explanation to substantiate his claim.

[103] If this over $5 million claim relates to his profit share, it makes little sense. Mr. Suleman’s position since 2008 has been that the Joint Venture had lost money because of overpaid management fees/draws. If this claim relates to his personal money directly invested and not repaid, Mr. Suleman conceded when examined in chief that he has been paid everything he personally invested except for $133,672 in the 9th line project.

[104] It appears to me that the spreadsheet (and supporting documents) which Mr. Suleman prepared regarding this claim for $5,358,201.69 suggests it is not really a claim for any amount owed by the defendants to him or to 1417217 Ontario. What it represents is all the costs that he says were incurred by 1417217 Ontario in respect of two properties purchased in Fort Erie, which were never finally developed, but were sold: the Black Creek and River Trail properties described below. The spreadsheet includes the land cost, ongoing mortgage payments, etc.

[105] The plaintiffs have provided no compelling legal theory which supports any of the defendants being liable for this amount. Mr. Suleman and Mr. Sharma’s agreement was to share profits. Neither Mr. Suleman nor 1417217 Ontario have any claim to these expenses from any of the defendants.

[106] I note that the defendants have raised many discrepancies in their materials related to this claim for $5,358,210.69, which I do not need to consider in these reasons as the Plaintiffs have not met the onus of proof for this $5,358,210.69 claim in any event.

L. The Plaintiffs’ Claims: Overpaid Management Fees

[107] The plaintiffs advance a claim for overpaid management fees. The defendants resist this claim both on procedural grounds and on its merits for want of proof.

[108] The plaintiffs’ Reply and Defence to Counterclaim pleads that “the defendants have been unjustly enriched and that the personal assets they acquired have been acquired as a result of taking draws out of the projects for their personal benefits, which draws were to be paid back on accounting on completion of the projects.” While inelegant, and only in the Reply, in my view this sufficiently pleads that Mr. Sharma was unjustly enriched because of overpayment of management fees, when combined with the claim for damages and the claim for an accounting in the Statement of Claim. I would add that the Estate has been aware of the plaintiffs’ position that Mr. Sharma was overpaid management fees since at least 2008 and their dispute originally arose because of this. There can be no suggestion that this issue has taken the defendants by surprise.

[109] Turning to the merits of the claim for overpayment of management fees, as noted above, in or around 2008, Rahim prepared an analysis of the Joint Venture’s overall profitability which showed that both joint venturers had been overpaid. Rahim used information that he obtained from GEAC (GEAC trial balances as opposed to Mr. Suleman’s trial balances) as well as information from speaking to Mr. Sharma, Mr. Suleman, and Mr. Suleman’s business partner Shiraz Karmali, and the documents at Mr. Sharma’s Millcreek premises.

[110] He said that he “wouldn’t have gone back to source documents…except for perhaps reconciling the investor and loan accounts. But beyond that, it’s the accounting system of Regalcraft. It’s GEAC. I’m not auditing GEAC.”

[111] Counsel tried to get Rahim to agree that he had calculated amounts owed to investors using Mr. Suleman’s records, which he repeatedly denied. He testified and I find that he verified payments made to investor corporations by verifying payments from 1417217 Ontario to the numbered company who invested.

[112] Rahim’s testimony is consistent with Naheel’s, who had set up GEAC and who testified that GEAC had a financial services and financial management module which could give reports on the financial health of the projects. Naheel also testified that all primary Joint Venture documents were stored at Mr. Sharma’s Millcreek premises, even those which related to expenses not processed through GEAC. Therefore, Rahim would have been in a position to prepare this reconciliation.

[113] I do not find it unreasonable that Rahim did not audit GEAC by looking at source documents. It was Mr. Sharma’s staff who entered all of that information and both Naheel and Rahim said that the accounting staff were well trained. Absent some reason to audit the GEAC records, I find that Rahim’s analysis was sufficient in using the GEAC analysis and other documents at Mr. Sharma’s Millcreek premises related to different expenses not reflected in GEAC—payments to investor and loan accounts, and overhead and administrative expenses.

[114] Rahim produced a written analysis dated January 2008 which indicated that the total profit at that time was $10,463,820, with investors being owed $2,724,488 in profits. Therefore, the profit to be shared between Mr. Suleman and Mr. Sharma was approximately $7.3 million such that Mr. Sharma should receive $4,1613,968 and Mr. Suleman (through SKS Investments) should receive $3,125,365. However, they had actually disbursed $7,038,680 to Mr. Sharma and $4,493,563 million to Mr. Suleman. Therefore, Mr. Sharma had been overpaid by $2,424,712 and Mr. Suleman had also been overpaid by $1,368,195.[^10] As well, Rahim’s analysis showed that they had disbursed $1,524,488 in profits to investors already, leaving $1,200,000 in profits owing.[^11]

[115] He testified that his analysis was current to November 2008, but that he would not have been aware of transactions that occurred after November 2008. He provided two boxes of documents as well as working papers in support of his analysis and testified that he updated his analysis as of October 2008.[^12] Unfortunately, he did not produce the specific calculations used to update Exhibit 2, which was dated as of January 2008.

[116] I note that Rahim was not called as an expert witness, but as a fact witness. He prepared his analysis as the official VP of Corporate affairs of the Joint Venture at the relevant time using Joint Venture documents, in particular the GEAC documents. I emphasize Rahim did not use Mr. Suleman’s trial balances or any of his financial statements (the focus of the defendants’ complaints about Mr. Suleman’s record keeping).

[117] I accept Rahim’s analysis, which he explained at trial. I note that he was not cross-examined on the working papers he produced. I found his testimony to be believable, credible and reliable. I note as well, that while Mr. Suleman was heavily cross-examined on alleged discrepancies in his records, most of these were never put to Rahim or Naheel.

[118] The Estate now claims (as I will discuss further below) that it lost all GEAC documents as well as access to the underlying GEAC accounting system sometime in November 2011. As I have found, these were the main Joint Venture records.

[119] I find this evidence relating to the loss of GEAC not credible, as discussed further below. Even if it is true that the Estate lost documents in 2011, Mr. Sharma and then the Estate had the GEAC system and other documents at least until 2011. They could have prepared their own analysis to dispute Rahim’s analysis. The Estate had a team of accountants who worked with Mr. Sharma and who attended meetings to discuss the Joint Venture accounts. The Estate never even tried to do their own analysis of Joint Venture accounts using their own records, which they had but allegedly are now gone. Having failed to conduct any analysis using records they had at the time to dispute Rahim’s analysis, the defendant are in no position to disagree with it. I repeat that both Rahim and Naheel testified that all payments (whether to the investor or for administration and overhead expenses) were recorded and verified at Mr. Sharma’s Millcreek premises, whether they were recorded on GEAC or not. I do not accept that the Estate required the books and records of Mr. Suleman’s administration companies to perform an analysis. These types of calculations were done throughout the Joint Venture without Mr. Sharma or the Estate having had access to such records. I note that MSN was the ultimate corporation through which administrative and overhead expenses were paid. This corporation was owned by Mr. Sharma. Rahim testified, and I accept, that he was denied access to its records.

[120] Further, I note that this trial proceeded over a number of spread out days. Rahim testified in chief on October 2, 2020 but was not cross examined until October 19, 2020. Although there was mid-trial production of documents from Rahim, the defendants had time to prepare and could have asked for an adjournment or other remedy if they required expert assistance to address any issues related to this late production of documents. I note that the remedy they chose to request in writing was costs thrown away, which I will address when the overall costs of this proceeding are determined.

[121] Therefore, the best evidence about the status of accounts between the joint venturers as of January 2008 is Rahim’s analysis, and I so find. In my view, all these circumstances—particularly taking into account the Estate’s “loss” of all GEAC documents, and its failure to have ever conducted any of its own analysis of Rahim’s conclusions using Mr. Sharma’s own documents—prove on a balance of probabilities that as of January 2008, both Mr. Sharma and Mr. Suleman had been overpaid management fees in the amounts Rahim found.

[122] At that time, the overpayment to Mr. Sharma constituted an enrichment to him and a deprivation to the Joint Venture, and there is no juristic reason why he should have been able to retain such funds, particularly in light of the agreement that at the end of the projects there would be an overall reconciliation and repayment of any amounts overpaid.

[123] The only difficulty with Rahim’s analysis is that it is only current to January 2008 and there were many further transactions afterwards as the Joint Venture wound down. The plaintiffs did not provide any persuasive evidence regarding the ultimate overpayment to either Mr. Suleman or Mr. Sharma taking into account all transactions which occurred as the Joint Venture was winding down.

[124] Therefore, I am compelled to dismiss this claim as it has not been proven.

[125] However, I am ordering an accounting, pursuant to the Estate’s counterclaim, which will commence with Rahim’s analysis. Therefore, the accounting will ultimately determine whether either of Mr. Suleman or Mr. Sharma have been overpaid and if so, by how much.

[126] I note that both parties want this accounting. The only difference is that the Estate wants it to begin from the start of the projects in 2000. This is obviously not possible given the loss of documents. I would not order it going back that far in any event given Rahim’s cogent and uncontradicted evidence regarding the status of accounts as of January 2008.

M. The Plaintiffs’ Claim: Proceeds of Sale of River Trail and Black Creek

1. The River Trail and Black Creek Pleadings

[127] Mr. Suleman advances specific claims with respect to the proceeds of sale of two properties bought in Fort Erie which were never developed—River Trail and Black Creek. The defendants have argued that the plaintiffs did not sufficiently plead their case related to the River Trail proceeds, so I will begin with this analysis.

[128] A statement of claim must be read as generously as possible with a view to accommodating any inadequacies due to drafting deficiencies.[^13] The purpose of pleading is to alert the other side to the case it has to meet, as a matter of fairness.

[129] In this case, I am satisfied that the plaintiffs have pleaded all the necessary underlying facts to put the defendants on notice of the case they had to meet with respect to the River Trail proceeds. The fact that they did not specifically plead the elements of some of the causes of action is not fatal because the underlying facts in support of the elements have been pleaded. The relevant parts of the Statement of Claim are as follows:

12: Suleman agreed to become a joint venture partner with Madan and agreed to become involved in two new projects proposed by [Mr. Sharma] to develop the River property and the 1639395 properties (“projects”) ... Both parties were to be equal partners and/or shareholders with equal decision-making rights in the corporations established for the projects. Both of them were also to be Directors of the corporations. Alternatively, each could nominate a person of their choice to act as director of these corporations.

13: The agreement between [Mr. Sharma and Mr. Suleman] was that advances would be returned to the plaintiffs with interest at the rate of 8 % per year as soon as the projects were completed and the direct costs for the construction and the construction financing were paid off, and both would share the profits or losses equally once the projects were completed (the “Agreement’)

15: When Rekha and Meena sold the River property they improperly retained, caused the defendant corporations to retain, the full proceeds of sale contrary to the agreement….

20: Meena and/or Rekha took over the management of the projects after the death of [Mr. Sharma’ and assumed the duties and agreements made by [Mr. Sharma] and [Mr. Suleman] in their capacity as estate trustee, shareholders(s), and/or directors of the defendant corporations.

23: The defendants both jointly and severally are liable to the plaintiffs for breach of contract, for breach of fiduciary duty, for negligence and for the full loss suffered by the plaintiffs along with interest payments being made by him on the funds advanced by him, and for any profits that may have been made by the defendants at the cost of [Mr. Suleman] and to trace any funds that may have been diverted by Meena and/or [Mr. Sharma] for the corporate defendants.

[130] In my view, these paragraphs sufficiently plead that the River Trail proceeds belonged to the Joint Venture, that the Joint Venture Agreement required such proceeds to be shared in the same manner as they had shared other revenues, and that Meena, Rekha, River Trail Estates and the Estate breached various duties by retaining these proceeds.

The River Trail Proceeds

[131] Turning to the matter of the River Trail proceeds, as noted above, in 2005 River Trail Estates Inc. (“River Trail Estates”) purchased property for development. Meena was the sole shareholder and director of River Trail Estates.

[132] On September 11, 2011 River Trail was sold for $2.1 million.

[133] $500,000 from the River Trail sale proceeds was paid to Thomas Crown Inc., and the plaintiffs assert this was a kick-back. However, the plaintiffs called no evidence to substantiate any relationship between the defendants and Thomas Crown Inc. As questionable as such a large commission fee might seem, I find that this claim has not been substantiated on the record before me, and that the only issue successfully advanced by the plaintiffs relates to the balance of the River Trail proceeds in the amount of $1,586,584.83.

[134] There is no dispute that Meena directed the proceeds in the amount of $1,586,584.83 to a company wholly owned by Rekha, 2132161 Ontario.

[135] Rekha admitted when cross examined that she personally signed a cheque to deposit the sale proceeds into 2132161 Ontario’s account. When Rekha was asked what the money was used for, her counsel objected to her providing any explanation on the basis that 2132161 Ontario was not a Joint Venture corporation or a party to this proceeding. Counsel for the plaintiff ultimately said he was content with her not providing any further information if her counsel objected.

[136] In my view, this was Joint Venture property. Paying this money to a non-Joint Venture corporation is a suspicious action that calls for explanation. Given that the defendants objected to providing any explanation, I draw the adverse inference that this money went towards non-Joint Venture purposes.

[137] I find that the Joint Venture Agreement required that any River Trail proceeds of sale would be shared and used for Joint Venture purposes for the following reasons:

a. All witnesses agreed that River Trail Estates was a Joint Venture corporation incorporated for the purpose of developing Joint Venture properties.

b. The defendants admitted that there would be sharing of revenues pursuant to the Request to Admit and in their Statement of Defence and Counterclaim in paragraphs 9 to 13.

c. Indeed, the basis for the Estate’s counterclaim is that Mr. Suleman was required to share Joint Venture revenues. Their own counterclaim implicitly accepts that this was the agreement.

d. River Trail was purchased using Joint Venture funds.

e. In 2007, Mr. Sharma and Mr. Suleman agreed that they would not develop River Trail, but they would sell the property instead. As noted above, in my view it was their implicit agreement at that time that the proceeds of sale would be dealt with in the same manner as other revenues—which was to pay them to 14172127 Ontario.

f. Further, as I have found above, the Joint Venture Agreement implicitly required holding companies to hold any Joint Venture property on the Joint Venture’s behalf and not use it for purposes outside of the Joint Venture’s objects. The Joint Venture could not work if such implicit understandings and agreements were not there. When Mr. Suleman or Mr. Sharma placed their representatives on the boards of such holding companies, such representatives were obliged to act in accordance with the agreements which the holding companies were bound by. They were required to use whatever position of control they had in Joint Venture corporations to ensure that such corporations acted in accordance with the Joint Venture Agreement, which these holding companies were a party to in any event. This arrangement did not create any conflict of duty and interest for the directors because the corporations were already bound in any event.

[138] River Trail Estates breached this contractual duty by directing the proceeds to a non-Joint Venture corporation. Meena, in her capacity as Trustee, breached her contractual obligation to use her position as director of River Trail Estates to ensure that it complied with its contractual obligation.

[139] While the defendants argue that Meena owed her duties to River Trail Estates as director, there was no evidence that River Trail Estates had any legitimate reason to pay these proceeds to 2132161 Ontario or that it did any business other than hold property for the Joint Venture. Indeed, given that River Trail Estates was a Joint Venture corporation, and given I have found that it was legally bound to hold property on behalf of the Joint Venture, Meena arguably breached her duty to River Trail Estates as a director by directing it to disburse funds in violation of its obligation pursuant to the Joint Venture Agreement.

[140] I note that Meena’s only explanation for why she did not pay these funds to 1417217 Ontario was that she felt that Mr. Suleman was not entitled to “one penny” because he had not shared certain proceeds with Mr. Sharma. It is essentially a set-off argument. In particular, as I will discuss further below, Meena claims that Mr. Suleman failed to share the proceeds of the sale of the last two homes in the amount of $600,000, a letter of credit in the amount of $552,500 and proceeds of sale of equipment in the amount of $255,000, all of which added up to $1.4 million. These setoff claims, however, were not proven.

2. The Black Creek Property Proceeds

[141] 1639395 Ontario purchased the Black Creek property for development by the Joint Venture.

[142] For the reasons set out above, I find that 1639395 Ontario was contractually obligated to pay the proceeds of sale of the Black Creek property to 1417217 Ontario pursuant to the Joint Venture Agreement.

[143] On or about January 16, 2015, the Court ordered that any proceeds of sale of the Black Creek property be held in trust pending agreement of the parties or further Order of the Court. The defendants have admitted that after payment of the Black Creek mortgage, $31,800 remained and is currently being held in trust pursuant to this Order.

[144] Given the proceeds of the sale of the Black Creek property are currently in trust and are available, there has been no breach with respect to such funds and I am directing that they be paid to 1417217 Ontario.

N. Fiduciary duty

[145] Fiduciary relationships are either categorical or ad hoc. The plaintiffs do not rely on any established category of fiduciary relationship. In Elder Advocates of Alberta Society v. Alberta,[^14] the Court held that the following six factors are required to establish an ad hoc fiduciary relationship and fiduciary duty:

a. The fiduciary has scope for the exercise of discretion or power.

b. The fiduciary can unilaterally use such discretion to affect the beneficiary’s legal and practical interests.

c. The beneficiary is peculiarly vulnerable to the fiduciary’s discretionary power. In that regard, the vulnerability must arise from the relationship.

d. The alleged fiduciary gave an express or implied undertaking of responsibility to act in the best interests of the beneficiary. In that regard, “the party asserting the duty must be able to point to a forsaking by the alleged fiduciary of the interests of all others in favour of those of the beneficiary, in relation to the specific legal interest at stake.”

e. The duty must be owed to a defined person or class of persons who must be vulnerable to the fiduciary in the sense that the fiduciary has a discretionary power over them.

f. The alleged fiduciary’s power may affect the legal or practical interests of the beneficiary.

[146] In the immediate case, the defendants assert that the claim for breach of fiduciary duty has not been particularized sufficiently.

[147] I disagree. The basis for the breach of fiduciary claim relates to the failure of the defendants to deal with the River Trail proceeds appropriately which is sufficiently particularized. Again, if the defendants did not understand this they could have brought a motion to strike or requested particulars.

[148] If I am wrong that there was an implicit agreement that the holding companies would hold property for the benefit of the Joint Venture, then I find that the relationship among Mr. Suleman, Mr. Sharma, 1417217 Ontario, and the various holding companies were fiduciary relationships. If there were no implicit contracts as I have found, then each of the actors had scope for the use of discretionary power, which could affect the other parties’ legal interests. They were all vulnerable to each other because of this and I find as a fact that they implicitly undertook to act in the best interests of the Joint Venture in their dealings with any assets. I note that Mr. Suleman said repeatedly that he operated on the basis of trust. Even Meena acknowledged this trust relationship when she told Mr. Suleman that she would hold the proceeds in trust—even though she did not. Therefore, if there was no contractual obligation, River Trail Estates had a fiduciary duty to hold the River Trail proceeds on behalf of the main Joint Venture corporation, 1417217 Ontario, and/or pay them to 1417217 Ontario. Again, the Joint Venture simply could not work without such duties being in place.

[149] Therefore, River Trail Estates breached its fiduciary obligation by paying the River Trail proceeds to a non-Joint Venture company.

[150] As well, when Meena advised Mr. Suleman that she would hold the River Trail proceeds in trust pending the accounting, she undertook to act in his interests with respect to such proceeds and ensure that they were protected pending the outcome of the accounting. (See discussion below regarding her statement to him.) She was acting in her capacity as Estate Trustee at that time. Mr. Suleman was completely vulnerable to her, and because of her dual role as Estate Trustee and director of River Trail Estates, she had the ability to direct the proceeds away from their intended destination. As such, Meena breached the Estate’s fiduciary obligation to preserve such funds for the benefit of the Joint Venture.

O. Lifting the Corporate Veil/Misappropriation

[151] As I shall next explain, given the misconduct and breach of contract described above, this is an appropriate case to lift the corporate veil that would otherwise protect the defendants from personal liability.

[152] In Yaiguaje v. Chevron Corporation,[^15] the Court of Appeal referenced the following circumstances when a court will pierce the corporate veil: (a) when the court is construing a statute, contract or other document; (b) when the court is satisfied that a company is a “mere façade” concealing the true facts; (c) when it can be established that the company is an authorized agent of its controllers or its members, corporate or human.

[153] In the above regard, where it is alleged that a corporation is a mere façade to protect its owners, the court must be satisfied that: (a) there is complete control such that the corporation is the “mere puppet” of the owner; and (b) the corporation was incorporated for a fraudulent or improper purpose or used by the owner as a shell for improper activity.

[154] In Chevron, the Court of Appeal emphasized that there is no basis for lifting the corporate veil on the basis that it is “just and equitable.”[^16] The Court quoted the leading case Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.[^17], in Chevron, at para. 70:

[70] The Transamerica test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule. Where the corporate form is being abused to the point that the corporation is not truly a separate corporation and is being used to facilitate fraudulent or improper conduct, the law recognizes an exception to this rule. It is important that courts be rigorous in their application of the Transamerica test because the rule is provided for in statute and stakeholders of corporations have a right to believe that absent extraordinary circumstances, they may deal with the corporation as a natural person

[155] As well, the Court in Chevron confirmed that the “group enterprise” theory is not a basis to lift the corporate veil.[^18]

[156] I note that in Chevron, the party who was asking the Court to lift the corporate veil had not made any allegation of wrongdoing against the party against whom it sought to lift the corporate veil. Indeed, in Chevron, the plaintiffs had plead that the defendant in question had not engaged in any inappropriate conduct. This was “a complete bar to the request to pierce the corporate veil.”[^19] I also note that in Transamerica, the Court did not require that the conduct in question be fraudulent. “Improper” conduct is sufficient.[^20]

[157] In the immediate case, the plaintiffs have clearly pleaded that the Meena and Rekha “improperly retained, or caused the defendant corporations to retain, the full proceeds from the sale contrary to the agreement”. While inelegant, this essentially pleads a conversion or misappropriation claim which involves a wrongful interference with the goods of another.

[158] Although the plaintiffs did not specifically plead lifting the corporate veil this is not fatal to their claim. In Shoppers Drug Mart Inc. v. 6470360 Canada Inc.,[^21] the Court of Appeal stated:

Lastly, I do not agree with Beamish that Shoppers failed to plead its claim that the corporate veil should be pierced. While those words were not used, it was evidence from the statement of claim read as a whole that Shoppers would advance this argument.

[159] In this case, it was always obvious from reading the Claim as a whole that the plaintiffs would advance this argument.

[160] The following facts support that Meena engaged in improper conduct with respect to the River Trail proceeds and these facts justify piercing the corporate veil in the immediate case:

a. when Meena became the Trustee of the Estate, she continued upon the path of selling the River Trail property and included Mr. Suleman in discussions about it. She reviewed the terms of the proposed sale with Mr. Suleman who told her to proceed.

b. Mr. Suleman signed the agreement of purchase and sale. Mr. Suleman said that he did not specifically read the terms because he trusted Meena.

c. Before the closing of the sale, Meena called Mr. Suleman and advised that they could not close the sale because the City required a payment of $117,000. Mr. Suleman borrowed the money, and he paid it so that the sale could close.

d. Mr. Suleman testified repeatedly and consistently that Meena told him that the proceeds would be kept in trust.

e. Meena also testified during her examination in chief that she told Mr. Suleman the River Trail proceeds were being held in trust—although she quickly added that she should not have said that to him—presumably because it was not true. She said: “I did say to him that the money is being—is sitting in a trust….Which, you know, it was not. I should not have said that.” [^22]

f. Instead, Meena directed the River Trail proceeds to 2132161 Ontario, a company owned by her mother Rekha. In my view, paying money from the sale of Joint Venture property to a non-Joint Venture corporation calls for an explanation. She provided none and I am drawing an adverse inference that she engaged in this conduct to deliberately remove the proceeds from the plaintiffs’ reach.

g. Moreover, the accounting reconciliation Meena prepared during the trial in support of the Estate’s counterclaim included the proceeds of the River Trail property in the amount of $1,586,484 as a receipt by the “Madan Group”. (Madan is Mr. Sharma, her father.) Her reconciliation reads as follows:

JV CURRENT STATUS OF MONIES PAID OUT VS. ACTUAL DISTRIBUTIONS REQUIRED AS PER JV AGREEMENT

	Madan Group	Musa Group
Per Compendium 1	3,408,126	5,390,044
Proceeds from River Trail Property	1,586,484	0.00
Total Per Group	4,994,610	5,390,044
Total Paid to Both	10,384,654
Entitlements per JV Agreement (Madan entitled to 2/3; Musa entitled to 1/3)	6,923,102.67	3,461,551.33
To correct disparity	1,928,492.67 [to be paid to the Madan Group]	1,928,492 [to be paid by the Musa Group]

[161] Meena explained that she put the proceeds of the River Trail property under the Madan Group because she was acknowledging that “we retained that money.” This is a significant admission. Regardless of who has possession of the River Trail proceeds, the Estate has acknowledged that these funds should be credited against the Estate in any reconciliation of amounts owed. This is an admission that even though Meena directed the funds to 2132161 Ontario, which is owned by Rekha, such that the funds are apparently out of the plaintiffs’ reach, the Estate has some kind of beneficial interest in or ability to access them. This could not be the case if Meena and Rekha were not personally involved in improper conduct with respect to these proceeds or directed them to 2132161 Ontario for some legitimate other purpose.

[162] The defendants relied upon Haggan v. Mad Dash Transport Ltd,[^23] which, however, is not at all comparable. That case involved an employee seeking damages against the individual directors when his commissions were reduced.

[163] I find that Meena used River Trail Estates as a puppet with respect to the proceeds of sale of the River Trail property for the following reasons: (a) Meena was the sole director and shareholder; (b) it was a single purpose corporation to hold land for the 1417217 Ontario; (c) there was no evidence that there was anyone else directing River Trail Estates’ conduct with respect to the proceeds; (d) indeed, the only evidence of anyone involved (other than Mr. Suleman who she consulted with) was that Meena negotiated the sale, sold the property and then made the decision to transfer the proceeds to 2132161 Ontario; (e) she provided no legitimate corporate reason why River Trail Estates would pay such funds to 2132161 Ontario in circumstances that call for an explanation; and (f) while there is usually more evidence of control, in this case there was sufficient evidence because on the record before me River Trail Estates is a single purpose corporation that did not do anything but own and then receive funds from the sale of the River Trail lands.

[164] I, therefore, lift the River Trail Estates’ corporate veil to hold Meena personally accountable for River Trail Estates’ wrongful conduct. In doing so, I recognize that she does not have title to these funds. However, I do not see this as less of a misappropriation because she took the money and gave it to someone else. By way of analogy, a person could not take someone’s car, give it to someone else, and then argue that they were not liable simply because they no longer had the car.

[165] I am also lifting 2132161 Ontario’s corporate veil to hold Rekha personally accountable. Rekha admitted when cross-examined that she signed the receipt for the River Trail’s proceeds, she is 2132161 Ontario’s sole shareholder and she provided no legitimate reasons for why 2132161 Ontario should receive these funds. These circumstances, coupled with the Estate’s admission that it has beneficial access to these funds, show that Rekha has complete control over 2132161 Ontario and is using it as a puppet to shield funds from the plaintiffs.

[166] In my view, this is the quintessential case where the corporate veil must be lifted. Meena and Rekha cleverly put a significant asset beyond the reach of the plaintiffs by directing it to a corporation owned by Rekha, all the while representing that such funds were being held in trust. Had Meena not told Mr. Suleman that she was holding the funds in trust, he could have sought a preservation order.

[167] Relying on ScotiaMcLeod Inc. v. Peoples Jewelers Limited,[^24] Meena argues she cannot be personally liable for decisions she made in her positions as an officer and director unless the plaintiffs establish a separate identity or interest from that of River Trail Estates, 1639395 Ontario or the Estate. ScotiaMcLeod is a case about directors’ and officers’ liability for the acts of their corporation.

[168] The reference to ScotiaMcLeod is not apt. Lifting the corporate veil and director and officer liability are related somewhat, but are not the same legal concept. I agree that there is no basis to sue Meena regarding River Trail Estates on the basis that she is a director alone. Such a claim must be particularized, and it must be established how the claim against her is different from against River Trail Estates. The plaintiffs did not do this. However, I am not fixing Meena with liability on the basis of her being director but on the basis that the corporate veil should be lifted for the reasons I set out above.

[169] As a result, I find Meena and Rekha jointly and severally liable for misappropriation of the River Trail proceeds which belonged to the Joint Venture and should have been paid to 1417217 Ontario. I also find that the Estate and River Trails Estate’s wrongful conduct and dealings with the respect to the River Trail proceeds also constitutes misappropriation. They all knew these proceeds belonged to the Joint Venture and, altogether, they misdirected them in any event.

Resulting Trust and Tracing

[170] The plaintiffs also rely upon India Association of Manitoba Inc. et. al. v. India School of Dance, Music & Theatre Inc.,[^25] in support of a claim that the corporations in question held the properties by way of resulting trust.

[171] In Goodfriend v. Goodfriend,[^26] the Supreme Court of Canada describes as trite law the principle in Dyer v. Dyer[^27], which is described by Professor Waters as follows[^28]:

The principle has been established since the early eighteenth century that if one person buys property, but has it conveyed into another’s name, or into the joint names of himself and another, that other becomes the resulting trustee for the purchaser of all the interests taken by that other. The best-known statement of principle, cited and quoted in many Canadian cases, is that of Chief Baron Eyre in Dyer v. Dyer:

The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold, or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive, results to the man who advances the purchase-money.

[172] The principle from Dyer v. Dyer could have applied in the immediate case. The River Trail and Black Creek proceeds should have been held in trust on behalf of the Joint Venture. However, the plaintiffs never pleaded resulting or any kind of trust. Therefore, this claim cannot succeed.

P. Negligence

[173] The plaintiffs did not adequately plead negligence with respect to any of the defendants, nor did it advance evidence which satisfies the elements of negligence with respect to any of the defendants. I, therefore, dismiss any claim in negligence.

Q. Highbury Estate

[174] The plaintiffs also claim that the defendants are in receipt of $1.0 million in respect of the sale of a property known as Highbury Estates. It is true that Rekha admitted that this property was bought with funds from a Joint Venture corporation called Sovereign, that none of Mr. Sharma, Rekha or Meena contributed to the purchase price, and that Rekha received $1.0 million of proceeds of sale of this property. However, this has never been pleaded and the plaintiffs therefore may not succeed on it. In Rodaro v. Royal Bank of Canada,[^29] the Court of Appeal for Ontario emphasized that a trial judge is not entitled to find liability on the basis of a claim or theory not pleaded by the plaintiff.

R. Defendants’ Counterclaim

1. Oppression Remedy

[175] I turn now to the Defendants’ counterclaim. Under s. 248(1) of the Ontario Business Corporations Act,a "complainant" can seek an order granting relief from oppression. “Complainant” is defined under s. 245 of the OBCA as:

a. a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

b. a director or an officer or a former director or officer of a corporation or any of its affiliates,

c. any other person who, in the discretion of a court, is a proper person to make an application under this Part.

[176] The oppression remedy focuses on the harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors, and is available to a wide range of stakeholders, including securityholders, creditors, directors and officers. In conducting the oppression analysis, the Court must answer two questions: (a) has a breach of reasonable expectations been established? and (b) if so, does the conduct complained of amount to oppression?[^30]

[177] Where stakeholders’ reasonable expectations have been breached, an oppression remedy will lie provided that the conduct complained of amounted to "oppression", "unfair prejudice" or "unfair disregard" of said interests. "Oppression" carries the sense of conduct that is coercive and abusive, and suggests bad faith. "Unfair prejudice" may admit of a less culpable state of mind, that nevertheless has unfair consequences. Finally, "unfair disregard" of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders' reasonable expectations.[^31]

[178] Examples of oppressive conduct in the context of closely-held corporations include: transactions involving shareholder loans;[^32] the use of corporate funds for personal use;[^33] the payment of excessive management fees;[^34] and the transfer of corporate assets or opportunities to other companies.[^35]

2. Alleged Misappropriation of Revenues

[179] The defendants claim the following misappropriations:

a. There were unauthorized online transfers in the total amount of $479,132.06 out of 1417217 Ontario’s bank account to corporations controlled by Mr. Suleman that had nothing to do with the Joint Venture.

b. There were revenues in the amount of $600,000 paid into 1417217 Ontario’s bank account in respect of the sale of the last two homes that have not been shared with the Estate.

c. A $552,000 letter of credit was deposited into 1417217 Ontario’s bank account and the funds have not been shared with the Estate.

d. 1417217 Ontario received proceeds of sale of certain equipment in the amount of $255,000 that have not been shared with the Estate. I note, however, that Rekha participated in selling this equipment and did deposit some proceeds into 1417217 Ontario’s bank account in or around 2009.

[180] Although these disputed transactions total $1,884,737.10, the defendants claim a different amount of $1,928,492.67 based upon the reconciliation prepared by Meena referenced above.

[181] The plaintiffs objected to the admission of this reconciliation which was produced shortly before Meena’s testimony and after the trial was well underway. However, the Estate argued, and I agreed, that this reconciliation was nothing more than arithmetic. To ensure fairness, I permitted Mr. Suleman to call rebuttal evidence.

[182] There are significant problems with the Estate’s claims of misappropriation as well as Meena’s accounting approach.

[183] First, Meena is not an accountant. She had no personal involvement in any of the accounting of the Joint Venture. She did not explain why she chose the particular documents she based her reconciliation on out of all thirty boxes of the plaintiffs’ productions. She did not explain why the documents she did review are the only ones that would be relevant to her analysis. Although she says that she had assistance from an accountant, she does not explain what that assistance was or who it was who assisted her.

[184] Second, a great deal of the defendants’ focus is on Mr. Suleman’s trial balances which he set up just to ensure there was enough cash available to pay expenses. However, there is no expert’s accounting evidence before me to explain or justify the defendants’ focus on these trial balances or to explain how, without any reference to any GEAC or other documents, the documents provide a meaningful way to approach the accounting in this case. Meena does not have appeared to consider many source documents.

[185] Third, Meena’s approach does not take into account the expenses or profitability of the Joint Venture. Rather, it is a calculation of all revenues received over the years, and then a re-division based upon their 2/3 and 1/3 split. That was not the parties’ agreement. Their agreement was to split profits—after all expenses were paid—and that there would be an overall reconciliation at the end of the Joint Venture.

[186] There were ongoing expenses related to the wind down of the Joint Venture after 2008 which Meena does not take into account. For example, Rekha testified that up until June 2013, 1417217 Ontario continued to pay the mortgage for the Black Creek property. As well, the City required the Joint Venture to do landscaping work. There are audit reports from the CRA after 2009, where the CRA disallowed various input tax credits with respect to GST which would therefore have to be repaid. Although Mr. Suleman was successful in some of the challenges he made, the CRA levied assessments against him personally as a director of 1417217 Ontario in 2017, for 1417217 Ontario’s non-payment of GST totalling almost $750,000.[^36] This means that 1417217 Ontario has a tax liability of $750,000 outstanding. As well, Naheel’s analysis shows that as of 2008, the investor corporation was owed $1,200,000 in profits.

[187] It makes no sense to simply consider the revenues without taking into account expenses and liabilities.

[188] Fourth, Meena reviewed only monies that had been paid out of 1417217 Ontario’s bank account; she did not take into account any monies paid into it.

[189] I am not even satisfied that Meena has accurately calculated the total revenues received by what she calls the “Madan Group” and the “Musa Group” which should be taken into account for the purpose of their profit split. Their profits were to be split after all expenses were paid. As I said above, Mr. Suleman and Mr. Sharma arranged the Joint Venture’s affairs such that there were many different corporations with different roles. Two of these corporations were run by Mr. Suleman and paid overhead expenses. These payments to corporations for administrative and overhead expenses should not be taken into account in the overall reconciliation of their profits any more than building expenses paid through Regalcraft (which was owned by Mr. Sharma) should.

[190] There was no evidence as to whether Meena has appropriately considered the role of the associated corporations, but I do note that the defendants’ closing submissions argue that Meena added up all administrative fees and management fees paid to any Joint Venture corporations Mr. Suleman controlled to calculate overall amounts paid to Mr. Suleman. Defence counsel attempted to get Mr. Suleman to admit that administrative and overhead fees were management fees, but he was clear that they were not the same thing.

[191] The Management fees were draws which were to be reconciled at the end once overall profits could be determined. The administrative charges were just like the building charges. The fact that they were incurred by a Joint Venture corporation controlled by Mr. Suleman does not mean that they are suddenly part of his draw or profit share as opposed to payments for expenses. I note that Meena does not appear to have included in her reconciliation of amounts paid to the “Sharma Group” all the amounts Mr. Sharma would have been paid for building expenses over the years to his building company Regalcraft, or even administrative payments made to MSN, which was Mr. Sharma’s company and which took over payment of administrative expenses at some point.

[192] I note as well that Meena’s analysis is inconsistent with Rahim’s analysis as to management fees paid to the joint venturers:

	Sharma	Suleman
Meena’s Analysis	$3,408,126	$5,390,044
Rahim’s Analysis	$4,613,968	$3,125,368

[193] This is a striking difference, even though the analyses were prepared many years apart. The Joint Venture was winding down after Rahim conducted his analysis and the significant differences above cannot be explained by the limited transactions that took place during this winding down period. As I have said, Rahim used the actual primary Joint Venture records, is an accountant, and was the official VP of Finance of the Joint Venture. I accept his analysis which casts serious doubt on Meena’s.

[194] With respect to the alleged misappropriations through unauthorized online transfers, all of these impugned online transfers were made between 2002 and 2008 when Mr. Sharma was still a director of 1417217 Ontario, received bank statements on a daily basis from Mr. Suleman, and received almost daily reconciliations which took into account bank statements. There is, however, no record of any written complaints regarding these transfers. There are no emails regarding this from anyone. There is no evidence of any inquiries made by the many accountants that worked with Mr. Sharma over these years.

[195] Meena claimed that it was her father’s practice to raise his concerns orally, but he did write a detailed letter of resignation in 2008, and he did not say anything about these allegedly unauthorized transfers or any type of alleged misappropriation in that letter.

[196] Naheel said, and I find, it was not possible for anyone to perform electronic bank transfers from 1417217 Ontario’s account without the knowledge and implicit approval of Mr. Sharma, because everything was recorded on 1417217 Ontario’s bank statements which were sent to Mr. Sharma on a daily basis. Naheel met with Mr. Sharma almost daily to present reconciliations and reports where Mr. Sharma could and did ask questions. Naheel agreed that at times Mr. Sharma expressed his view that he thought there were misappropriations. However, after their meetings when Naheel explained the accounting, Mr. Sharma was satisfied. In response to questioning, he stated:

Q. …ok, whatever happened in those meetings, he never got comfortable with any of this, if I can use those terms, and he actually resigned.

A. No, that’s not true, because I was there…

Q. (Indiscernible)

A. Sir, you were not in the meeting. I was there in the meeting, and I could say that after the meetings were done, he was satisfied by the data that was presented to him, hence the continuation of these projects.

[197] Had these online transfers been an issue, or had Mr. Sharma not agreed that they were permitted, I infer that they would not have been able to continue as they did with this Joint Venture for so long and/or that there would be some written communications from some of Mr. Sharma’s on-site accountants.

[198] I note that Naheel was shown most of these impugned online transactions when cross-examined and he never wavered on the fact that Mr. Sharma would have been aware of all of these online transactions and agreed to them. I note that again, counsel repeatedly emphasized that there were no written agreements about this, but there were no written agreements about anything, so I do not find this a persuasive criticism of Naheel’s evidence.

[199] As well, at trial, Meena and Rekha testified that after Mr. Sharma allegedly raised concerns about these online transfers, Mr. Suleman began faxing bank statements to Mr. Sharma, where certain online transfers were blacked-out. Meena said she learned of these blacked-out entries from Mr. Sharma, but did not testify that she actually saw them.

[200] This is inadmissible hearsay. As set out in R v. Khelawon,[^37] hearsay evidence is presumptively inadmissible unless an exception exists. Even if an exception does not exist, it still may be admitted if the indicia of reliability and necessity are established. In this case, Meena and Rekha are both the defendants with something at stake. There is no documentary evidence which supports what they say. Their evidence about what Mr. Sharma told them about allegedly blacked out statements is not necessary because there were other witnesses who had actual knowledge of any faxed bank statements (accountants, book-keepers and staff) who they did not call, and they did not explain why. Therefore, Meena’s and Rekha’s evidence in respect of these blacked-out statements should be given very little weight, even if the plaintiffs’ counsel never objected when the evidence was being lead.

[201] Counsel for the plaintiffs asserts that the blacked-out statements were raised for the first time in this proceeding when Meena and Rekha testified at trial. However, the plaintiffs did not lead evidence on this. Plaintiffs’ counsel could have asked Mr. Suleman in rebuttal whether anyone had ever raised the issue of blacked-out statements before the trial, but he did not.

[202] Nevertheless, there are significant additional concerns with this evidence. None of these allegedly blacked-out bank statements have been produced. I find it odd that none of these alleged bank statements would be preserved and/or that there would be no written record of any such significant irregularities.

[203] At trial, Meena testified about concerns that she raised at meetings with Mr. Suleman in 2008 and 2012. She says she raised concerns about the letter of credit, the proceeds of the last two home sales and the proceeds of sales by Sovereign. She did not testify she raised concerns about these allegedly blacked-out statements at those meetings. I find it extremely odd that she would have been aware of something like this, while raising issues of concern with Mr. Suleman, and did not raise these allegedly blacked-out statements at the time.

[204] As well, during the discovery process, the defendants made extensive inquiries of Mr. Suleman about the accounting records, filed as Exhibits 23 to 25. These Exhibits contain more than 1,100 specific questions about specific accounting entries. None of these inquiries make any requests about allegedly redacted bank statements sent to Mr. Sharma by Mr. Suleman.

[205] Further, although Mr. Sharma took proceedings in the past against another joint venture party who he felt had wronged him, he never brought proceedings in respect of such a significant matter against Mr. Suleman.

[206] The defendants did not even cross-examine Mr. Suleman, Naheel or Rahim about the existence of these allegedly blacked-out statements at trial. Apart from the fact that this violates the rule in Browne v. Dunn [^38] the defendants’ failure to cross-examine on this issue, in the context of the kind of gruelling cross-examination that took place before me, is very telling.

[207] Finally, the Estate did not even plead that there were unauthorized online transfers from 1417217 Ontario’s bank account or that anything on bank statements had been blacked-out by Mr. Suleman in furtherance of some alleged misappropriation. While the defendants raise many arguments about the adequacy of the plaintiffs’ pleadings, the claims therein can be inferred from reading the pleading as a whole. What the defendants did by raising specific alleged misappropriations without any pleadings setting them out is the very definition of unfair surprise.[^39] I note again that plaintiff’s counsel did not object until after the evidence had already been lead, but I did not find the defendant’s evidence persuasive in any event.

[208] With respect to other amounts the Estate claims were misappropriated, just because funds received by 1417217 Ontario have not been distributed to Mr. Sharma or his Estate does not mean that Mr. Suleman misappropriated them. The parties had agreed that at the end of the Joint Venture they would conduct an overall assessment of its profitability. At the time of the receipt of the some of the funds which the Estate says Mr. Suleman did not share, the Joint Venture had significant liabilities.

[209] With respect to the letter of credit received by 1417217 Ontario, the Estate argues that the payment of $500,000 to 1507339 Ontario thereafter was a misappropriation. 1507339 Ontario is the investor company. Rekha acknowledged that any repayments to an investor would not be a misappropriation.

[210] The Estate asserts that Mr. Suleman is obfuscating matters by not producing 1148153 Ontario’s and 1507339 Ontario’s books and records showing purported deposits in 1417217 Ontario’s bank account.

[211] It is unclear to me why the defendants need the particulars with respect to each individual investor when Mr. Suleman and Mr. Sharma had clearly set up their Joint Venture in a manner where this information was not required to be disclosed. Why would they need 1148153 Ontario’s or 1507339 Ontario’s records to verify purported deposits in 1417217 Ontario’s bank account when they had 1417217 Ontario’s bank records?

[212] The Estate also complains that there has been no production of any loan agreement. Again, there were virtually no written agreements about very much, so I do not find this surprising.

[213] I also find it not credible that Mr. Sharma, as builder, who needed financing to build these projects, would not have records related to the total advanced and amounts repaid. This information would obviously be critical to his ability to build the projects. Rahim testified that every time there was a calculation of interest paid it was validated by Mr. Sharma’s accountant and presented to Mr. Sharma. In order to be able to do that, the accountants in Mr. Sharma’s offices would have had to know exactly what the total investments were as well as how much had already been repaid and amounts remaining to be paid. They performed these calculations for many years without having the investor list or the books and records of 1148153 Ontario or 1507339 Ontario.

[214] In any event, Mr. Sharma and the Estate had complete records of everything that went into and came out of 1417217 Ontario’s bank account. They could tell from GEAC entries what was a building expense or sales revenue, and what amounts were paid to the companies handling the overhead. They also knew what their own draws were. Mr. Sharma and the Estate had an accounting room with records of sales, their own bank reconciliations, project budgets, GEAC reports and invoices.

[215] It is a logical inference that all other deposits into 1417217 Ontario’s account were investments or loans to fund the project, and all other payments out of 1417217 Ontario’s account were repayments of these investments or loans or interest thereon.

[216] As well, the defendants provided no expert testimony that they needed the identities of the individual investors, or the books and records of the companies through whom investment funds flowed, to determine what the total investments were and how much of the total investments were repaid or are currently outstanding.

[217] It is the defendants who are alleging that the $500,000 paid to 1507339 Ontario was a misappropriation. They must prove this. It is not a reverse onus whereby once they allege it, Mr. Suleman must prove there was no misappropriation.

[218] In order to prove that this payment to 1507339 Ontario was not a legitimate payment to the investor, the defendants would have to show that no further amounts were owed to the investor. They have not. Recall that Rahim concluded the investor was still owed $1,200,000 in profits as of January 2008.

[219] In making my findings of fact and determining that the defendants have not met the onus of proof for their misappropriation claims, there is also the issue of the missing GEAC and other hard copy records which had been stored at Mr. Sharma’s offices.

[220] Meena and Rekha testified that they forwarded hard copies of the GEAC and other records to Mr. Suleman to assist him with the GST tax audit between the years of 2006 and 2008. Rekha confirmed at trial that only documents from 2006 to 2008 would have been sent to Mr. Suleman. Meena and Rekha say that Mr. Suleman did not return these; he says he did. Given my concerns about their credibility, I prefer Mr. Suleman’s evidence on this issue and find that he returned these documents.

[221] Even if he did not return these, what happened to the other paper records pre-2006? Would there not be evidence of the allegedly blacked-out statements in the pre-2006 records that they did not send to Mr. Suleman if they existed?

[222] Meena and Rekha admitted that after Mr. Sharma resigned, the defendants did not seek any review of the GEAC documents on site.

[223] As well, apart from the paper GEAC records, the defendants had the actual GEAC system. What is particularly unpersuasive about the defendant’s case is that Mr. Sharma, and then the Estate, had a number of their own accountants working with them at Mr. Sharma’s Millcreek premises. When Mr. Suleman asserted that Mr. Sharma had been overpaid, why did none of these accountants ever use the documents they had to conduct their own analysis to dispute this claim?

[224] As well, Rekha testified that at no time did Mr. Sharma ever engage an accountant to review or audit the records they had. I find it very odd that he would not have done so, if he was in fact raising all of the concerns that Rekha and Meena allege. Meena even testified that in 2008 before he died, Mr. Sharma told her that he intended to get a forensic auditor. She also testified that in January 2012 when they met with Mr. Suleman to discuss accounting issues, her accountant Carlos attended with them. She said that Carlos was an accountant who had 15 years of experience in the construction industry, had worked for banks and financial institutions, and was well versed in accounting especially as it pertains to construction.

[225] After 12 years, many days of discovery, more than a thousand answers to written interrogatories about Mr. Suleman’s records, and access to many accountants who worked for them, the defendants have not provided any expert evidence in support of their very serious claims. Instead, they provide unpersuasive evidence from a non-accountant, Meena—the person who misdirected the River Trail proceeds.

[226] As well, for the first time at trial, Meena and Rekha advised that the electronic GEAC file was destroyed through ransomware sometime in 2011. Even if this ransomware allegation is true, why did no one from the defendants conduct any analysis using the GEAC system, or the documents they did have, in the time since the dispute arose well before 2011?

[227] The defendants continually complained about the failure of the plaintiffs to produce documents like management packages and other analyses provided to Mr. Sharma over the years. Given that the accounting staff (including Naheel and Rahim) all worked out of Mr. Sharma’s Millcreek premises which had a storage room for relevant documents, I am inferring that any such documents would have been stored there. It is not the plaintiffs who have failed to produce these materials; it is the defendants who must have lost them or not retained copies of their originals.

[228] As well, Meena and Rekha provided no evidence from any technical employee as to any ransomware attack having occurred. Further, Meena was impeached on answers she gave during her discovery which were inconsistent with this evidence. In 2013 at her discovery, when Meena was asked if they still had the GEAC system, she said that they had a new server, and she did not know what had happened to the old server. She did not say GEAC or their old server had been corrupted or that it had been destroyed by the ransomware attack that allegedly occurred in 2011. I find Meena’s explanation at trial that she simply did not understand the technology enough to give a clear answer as to what happened to GEAC during her discovery is not credible. As well, there is an ongoing obligation to correct answers given on discovery, and she did not correct this answer on an issue which is critical given the defendants’ request for an accounting dating back to the year 2000.

[229] Moreover, Naheel testified that there was a back-up system for GEAC. Meena and Rekha did not produce any evidence from any staff or otherwise about what happened to the back-up system and why it could not be restored. Indeed, Meena said that she did not even try to restore any back up, allegedly because it was encrypted, but there is no evidence of this other than her bald testimony. As well, she did not even ask any of her IT staff to look for the back-up.

[230] I am drawing an adverse inference based upon the defendants’ failure to call accounting staff from Regalcraft to testify regarding allegedly blacked-out transactions on the bank statements or other alleged disputed transactions, as well as their failure to call any evidence regarding the ransomware attack, apart from their bald oral evidence.

[231] I am inferring they did not conduct their own analysis because it would not have supported their assertions.

[232] In all the circumstances, I am not satisfied that the defendants have proven on a balance of probabilities that Mr. Suleman misappropriated funds and thereby conducted the affairs of the 1417217 Ontario in a manner which was oppressive or prejudicial. I find Meena’s reconciliation unpersuasive and severely flawed.

[233] I conclude this part by noting that the defendants forwarded a recent case to my attention after submissions were made; i.e., V.M. Koury Investments Ltd. v. Bolton Steel Tube Co. Ltd.,[^40] where the Court found oppression and ordered the oppressor to pay an amount equal to the unexplained taking of funds. There is a significant difference between Koury and this case; in Koury, the party alleging oppression by virtue of misappropriation had an accounting expert who analyzed the records. The analysis which was presented to me by the defendants is woefully deficient for the reasons I have set out above.

S. The Failure to Maintain Books and Records

[234] The defendants also argue that they are in any event entitled to an accounting because the way in which Mr. Suleman maintained the books and records was deficient and this has made it impossible to ascertain the state of accounts between the joint venturers. They argue that this also constitutes oppression.

[235] First, I disagree that Mr. Suleman was charged with the sole responsibility of keeping records for all the reasons set out above.

[236] When the Joint Venture concluded, the parties had agreed that there would be an overall reconciliation. In my view, this was a joint responsibility.

[237] Unfortunately, Mr. Sharma passed away before this could happen. Afterwards, Meena stepped into Mr. Sharma’s shoes and the parties appeared to continue in the same fashion in terms of record-keeping—although all GEAC documents are now apparently missing. Apart from Meena’s analysis, which I do not accept as valid or persuasive, it appears that the only financial records which reconcile what happened to the Joint Venture accounts after Rahim’s analysis are Mr. Suleman’s financial records.

T. The Alleged Financial Accounting Discrepancies

[238] First, the defendants say that Mr. Suleman failed to produce contemporaneous financial statements or tax returns and did not file them on a regular basis as the Joint Venture was ongoing. Mr. Sharma was a director of 1417217 Ontario. I infer and find as a fact, however, that Mr. Sharma would have been aware of the manner in which Mr. Suleman prepared and filed taxes. There is no evidence before me that anyone ever complained to Mr. Suleman about the way he prepared these documents before this action. Mr. Sharma’s reasonable expectations could not have been violated by something he knew about and implicitly accepted. As well, there is no expert evidence before me regarding this issue or the tax returns he did file. Indeed, the defendants never even referred to these tax returns in evidence.

[239] Second, they say that his Statement of Earnings for the year ending December 31, 2006 records gross profits and total operating expenses of $5,469,642. Mr. Suleman testified that he did the same thing in previous years, because he had no access to GEAC and they would be calculating profitability at the end of the Joint Venture. There was no accounting evidence that there was anything improper about doing this, nor any evidence that the CRA raised concerns about this.

[240] Third, the defendants complain that his tax returns must have been incorrect since they would be based on his financial statements. No one showed me one tax return or outlined anything specific about them that would have been problematic or below standard for a CPA like Mr. Suleman. In any event, Mr. Suleman acknowledged that the financial statements were estimates only and that all issues would be reconciled at the end. They were not based on the actual primary records. I find that when Mr. Sharma was alive, he would have been aware of this and implicitly accepted it. Therefore, his reasonable expectations could not have been violated.

[241] Fourth, the defendants argue that Mr. Suleman improperly claimed input tax credits which were ultimately disallowed. While the defendants say that this saddled the Joint Venture with a substantial tax liability, this would logically just be the tax liability that the Joint Venture should have paid in the first place. Indeed, Mr. Suleman challenged the CRA, and the ultimate tax bill was much lower than what the CRA initially claimed. Therefore, he did a satisfactory job for the Joint Venture when it came to this tax liability. Again, even if his initially claimed input tax credits were incorrect, there was no expert analysis before me regarding how he calculated the input tax credits or why what he did was somehow oppressive.

[242] In any event, no one showed me any legal precedent which establishes that being wrong or making a mistake that results in a CRA assessment is enough to establish oppression.

[243] Fifth, the defendants made an incoherent argument that the existence of the input tax credits problem meant that there were thousands of dollars of invoices that Mr. Suleman collected but never paid. The defendants did not prove this to the requisite standard. If the defendants wanted to make such a complicated point, once again, they should have obtained an expert and/or cross-examined Naheel or Rahim on this issue. Naheel and Rahim are both Chartered Accountants and were there at the time. They might have been able to assist this court with how input tax credits work and whether Meena’s retroactive analysis of invoices is the appropriate manner of addressing this issue.

[244] The defendants also focused heavily on particular entries made by Mr. Suleman in some of his post-2008 accounting records. Most of the discrepancies set out in the defendants’ closing submissions arise from Trial Exhibit 30 (financial statements) and Trial Exhibit 6 (Mr. Suleman’s accounting explanation for why Mr. Sharma had been overpaid).

[245] Not all of the defendants’ concerns were adequately proven and Mr. Suleman did have some explanations which I found credible and reliable. Nevertheless, the defendants were successful in demonstrating that there were enough discrepancies in the records which Mr. Suleman kept after 2008 that these records, overall, do not reliably reflect the transactions which occurred after 2008, and are not useful in calculating the overall state of accounts.

[246] Since these records appear to be the only records now, I am satisfied that this creates a circumstance of prejudice for which an accounting pursuant to rules 44 and 45 is the appropriate remedy. Mr. Suleman is now in control of 1417217 Ontario and will be in control of the River Trail and Black Creek proceeds once they are repaid. As such the unreliability of his post 2008 records does create prejudice for the Estate who has a 2/3 interest in the overall profitability at the end of the day.

[247] To illustrate the nature of the concerns raised and the need for the accounting, as well as the fact that not all concerns raised have been proven, I have set out the most significant discrepancies alleged by the defendants in their closing submissions, Mr. Suleman’s response, and my analysis as to whether the discrepancy is a cause for concern:

Trial Exhibit 30	My analysis
Statement of Earnings for 2010 and 2011: The Statements of Earnings for years 2010 and 2011 reflect new construction costs of $278,439 and $1,775,899, respectively. There was an adjustment to the 2012 Statement of Earnings whereby $1,587,222 was removed from construction costs; Mr. Suleman explained that this was to correct an over-accrual of construction costs. After taking into account this reversal, the statements report total construction costs of $467,116 incurred in 2010 and 2011 when the defendants say no construction was taking place.	I note that the defendants argued in their closing submissions that these entries showed that there was $1,587,222 in new construction costs, which is their mistake in reading the document. This number was in brackets and was a credit which reduced accrued construction costs. For some reason, they also criticized Mr. Suleman for indicating that some of the construction costs were accrued because they related to old construction costs not paid. Defence counsel argues this contradicts Mr. Suleman’s evidence that he prepared his trial balance on a cash basis. I do not find this contradictory or improper. The defendants provided no expert evidence that it is inappropriate to prepare accounting statements on an accrual basis and trial balances on a cash basis.
Specifically, with respect to the $278,439 (of the $467,116 construction costs) reflected in 2010, Mr. Suleman testified that in 2010 there was some construction ongoing at the Fort Erie property and he paid these costs on the instructions of Meena or Rekha in 2010 and that the invoices are at Mr. Sharma’s Millcreek premises. Meena and Rekha denied they asked Mr. Suleman to pay any expenses and defence counsel argued that it was highly improbable that Mr. Suleman would do anything at their instruction given their ongoing dispute.	Independent evidence demonstrates that there was indeed a sales office built on Fort Erie and the City was requiring them to do landscaping work as a condition of selling the land. The contemporaneous documents are clear that the parties were working amicably at the time to wind down the Joint Venture. Indeed, Mr. Suleman even trusted Meena to sell River Trail and hold the proceeds in trust. In his closing submissions, Mr. Suleman references email exchanges between Mr. Suleman, Rekha and Meena which support that there were ongoing costs, including an $85,000 property tax bill and landscape work which was required by the City of Mississauga before it would release the letter of credit, and that the parties were working on it together cordially. In Rekha’s cross-examination, she acknowledges that there were expenses related to landscaping. Unfortunately, no invoices have been produced. Each side says the other has them. I prefer the plaintiff’s evidence that there were some ongoing expenses that Mr. Suleman paid on Meena and Rekha’s instructions and that the invoices were at Mr. Sharma’s Millcreek premises. The parties continued the Joint Venture while winding it down and I see no reason why they would have abandoned their old practice of Mr. Sharma’s Millcreek premises faxing information on cheques required to make payments. Without these invoices, I accept Mr. Suleman’s evidence.
Statement of Earnings for 2010 and 2011: Defence counsel made much of the fact that Mr. Suleman recorded work in progress at the beginning of 2010 in the amount of $3.9 million, when no construction was ongoing. Mr. Suleman explained that until the River Trail land was sold, the purchase price of River Trail remained part of the cost of sales. In 2012 he moved it from being a cost to being an asset because it had been sold.	I am not persuaded by the defendant’s argument. No accountant testified that this statement was wrong from an accounting standpoint.
Notes to the Financial Statements ending December 31, 2012: The Notes reflect loan receivables in the total amount of $1,480,000 from companies owned by Mr. Sharma. The defendants argued that Mr. Suleman admitted that this record meant that advances were made to Mr. Sharma’s companies in 2012, which the defendants argued was implausible given the parties’ dispute and Mr. Sharma’s death.	When one reads the entire exchange in the transcript, Mr. Suleman said that these loans are not reflected in prior balance sheets because “it must have been before, but it all got recorded in 2012.” I took this testimony to mean that he was saying the advances were made before but only got recorded when he prepared the 2012 financial statement. There was no documentary evidence of any such prior advance, but to be fair, this had never been pleaded and appears to have been raised for the first time at trial. I agree that this discrepancy is significant, requires further explanation and documentary proof and the accounting I am ordering will address this.
Statement of Earnings ending 2012: The Statement of Earnings ending 2012 lists operating expenses of $602,065. The defendants assert that this makes little sense given that construction had stopped as of 2009. The defendants also challenged individual components of this $602,065.	I agree that operating expenses in this amount in 2012 should be further considered particularly given Rahim’s evidence that he even thought that there should not be significant operating expenses in 2008 as the project was winding down. The accounting I am ordering will address this concern.
$412,350 of the $602,065 operating expense is stated to be in respect of bank charges and interest. Recall the Joint Venture was still carrying the mortgage on Black Creek.	$412,350 in respect of bank charges and interest is not surprising given the fact that at that time the Joint Venture was still carrying the mortgage on the Black Creek property and indeed did so until 2015. Nevertheless, documentary support is required.
$57,000 of the $602,065 operating expense is reflected to be in respect of “professional fees”. Mr. Suleman initially explained that $5,000 of this amount related to a payment to the law firm Forbes Chochla in May 2012 which he paid on Meena and Rekha’s instructions. With respect to the remaining amount, Mr. Suleman explained that $52,000 was an estimate of legal expenses which would have to be incurred by 1417217 Ontario to pursue the proceeds of the Fort Erie properties.	The defendants called no expert accounting evidence to show that it is inappropriate to accrue costs incurred but not yet paid on a financial statement. I accept Mr. Suleman’s explanation
$100,000 of the $602,065 operating expense is listed as an operating expense for profit paid to investors, Mr. Suleman indicated that the $100,000 was paid to an investor in 1148153 Ontario, Hussain Amari, who wanted a tracing order of monies and that Mr. Sharma had told Mr. Suleman to simply pay him to get rid of him. However, Mr. Sharma had died three years earlier. When confronted with this, Mr. Suleman said that Mr. Sharma had given him the instructions years earlier but they had to wait until they had the money to pay this investor.	First, Mr. Suleman’s explanation is prohibited by section 13 of the Evidence Act as there is no corroboration for this. Second, Rahim’s evidence is that the investor corporation is 1507339 Ontario. Therefore, 1417217 Ontario’s financial statements should not take into account amounts paid to individual investors. This is a valid discrepancy raised by the defendants which the accounting I am ordering will address.
2012 Balance Sheet: The 2012 Balance sheet records over $1.2 million for “investors to be paid.” However, none of these loans from investors are recorded in prior years’ balance sheets. Mr. Suleman’s explanation is that these investors loaned their money to an investment company in prior years which was then advanced to the Joint Venture but had not been recorded. He subsequently determined that this liability was 1417217 Ontario’s responsibility and so he reflected these amounts on 1417217 Ontario’s financials in 2012.	There was no documentary evidence in support Mr. Suleman’s explanation, but again, to be fair, this had never been pleaded and appears to have been raised for the first time at trial. I note that Rahim had concluded in his 2008 reconciliation that there was $1.2 million which remained owed to investors which is the exact same number reported by Mr. Suleman. However, Mr. Suleman asserts that he repaid investors $500,000 from the letter of credit in 2011. Therefore, this entry by Mr. Suleman is concerning and requires further examination. This is a valid discrepancy raised by the defendants which the accounting I am ordering will address.
Trial Balance for Churchill 2: The 2009 trial balance for the Churchill 2 project, which had been completed in May 2009, shows that Mr. Suleman transferred monies from 1417217 Ontario’s bank account to Sovereign, in respect of construction costs even though there was no construction happening after May 2009 (November 18, 2009: $10,095.24; December 7, 2009: $12,000; December 22, 2009: $47,619.05; December 29, 2009: $20,000: Total: $89,714.29.) When cross-examined, Mr. Suleman could not explain why he transferred this money to Sovereign for construction costs given no construction was ongoing. He ultimately said that he had to pay the mortgage on the Black Creek property and that calling these amounts construction costs was a mistake. He said these transfers should have been booked as intercompany transfers.	There was no documentary evidence in support of Mr. Suleman’s explanation, but again, to be fair, this had never been pleaded and appears to have been raised for the first time at trial. In my view the fact that these transactions were booked for one thing but then described to apply to something else is concerning and is a valid discrepancy raised by the defendants which the accounting I am ordering will address.
Statement of Earnings for the Year Ending December 21, 2010: The Statement of Earnings for the year ending December 21, 2010 reflects an administrative expense of $41,250. Mr. Suleman testified that this was paid by 1417217 Ontario to his company 1367298 Ontario for overhead expenses. The defendants pointed out that Naheel and Rahim testified that beginning in 2007, 2127021 Ontario took over responsibility for paying overhead expenses from 1367298 Ontario. Therefore, the defendants assert that this amount could not have been paid for overhead expenses as recorded.	I am concerned about these entries because there is no explanation for the discrepancy, but these entries will be addressed in the accounting I am ordering.
Trial Exhibit 6
1417217 Ontario group of companies balance sheet as of November 30, 2011 (Exhibit 6): This document shows a profit of $459,719 for the Oakville project. After an apparent over-distribution of profit in the amount of $1,052,071, including $363,300 paid out to investors, the project records a loss of $592,352. However, these numbers are inconsistent with Mr. Suleman’s list of investors for the Oakville project at Trial Exhibit 36, where $354,600 is shown as profit being paid out to investors. The difference between these two figures is $8,700. When confronted with this by the defendants at trial, Mr. Suleman explained that $354,600 was paid out to the investors, and he received the balance ($8,700) because his agreement with Mr. Sharma was that he was supposed to collect 16% in interest.	First, Mr. Suleman’s explanation as to what Mr. Sharma said and their 16 % interest agreement is prohibited by section 13 of the Evidence Act as there is no corroboration for this Nevertheless, in my view, this concern arises from the defendants’ failure to understand the investing arrangement. 1507339 Ontario was the investor company who had the arrangement with 1417217 Ontario. The individual investors had their arrangement with the lending company. It does not matter what Mr. Suleman paid the individual investors. He was entitled to arrange a loan from 1507339 Ontario to 1417217 Ontario at a rate of 8 % and have a different arrangement with what individual investors would receive.
The November 2011 Balance Sheet also shows profit paid to investors for the Wismer 1 project in the amount of $637,368. However, Trial Exhibit 39, Mr. Suleman’s list of investors for the Wismer 1 project, shows that $593,250 was paid out to investors. The difference between these two figures is $44,118. When asked about this discrepancy, Mr. Suleman testified that the $637,368 figure in Trial Exhibit 6 "should be $593,250". At trial, he denied paying the difference to himself, and then was impeached because during his examination for discovery in May 2013, he gave evidence that he and Shiraz were paid the $44,118.	The change in Mr. Suleman’s evidence is concerning. Nevertheless, in my view, this concern arises from the defendants’ failure to understand the investing arrangement as described above.
There are other similar entries related to differences between what the financial statements say and comparisons to amounts payable to investors in Mr. Suleman’s personal trial balances.	Similar to above, in my view this arises from the defendants failure to appreciate that there were investor corporations and Mr. Suleman was at liberty to have his own separate arrangement with his individual investors as to what their payment was.
2010 Trial Balance for Churchill 2: The 2010 trial balance for the Churchill 2 project also shows construction costs during a year when no construction was taking place totaling over $100,000. There is also one $63,000 construction cost listed as being paid to 1309298 Ontario Inc. on November 19, 2010. Mr. Suleman testified that 1309298 Ontario Inc. was an investor. However, his investor list for Churchill 2 shows that this investor was fully repaid its investment by August 14, 2008. Mr. Suleman then explained that the $63,000 “construction cost” was actually profit paid to that investor.	I find the discrepancy somewhat concerning but like other concerning entries, it will be addressed in the accounting I am ordering.

[248] As stated, most of the concerns related to Trial Exhibit 30 and Trial Exhibit 6. Trial Exhibit 6 was prepared sometime in 2011 and given to Meena at that time as justification for money owed by Mr. Sharma.

[249] Mr. Suleman gave confusing testimony on when Trial Exhibit 30 was prepared. He first said that it was a compilation he prepared in 2012. He then backtracked somewhat and suggested that the financial statements therein were the basis for his tax returns, which suggests that some were prepared contemporaneously. However, the defendants point out that Mr. Suleman did not file tax returns contemporaneously, but in batches—once in 2005 and once in 2013. I find as a fact Exhibit 30 was not a contemporaneous document. Neither was Trial Exhibit 6.

[250] I note as well that the defendants never took Mr. Suleman to all of the financial statements contained in Trial Exhibit 30. Had they done so they would have also seen that just as he testified, in the early years, he was reporting gross income and gross revenues as the same because they were rolling profits into subsequent projects and he could not tell the overall profit until the end. These early financial statements were estimates and Mr. Sharma—who was good with numbers, received daily updates and was a director—would have been aware that this is how the income tax statements and/or financial statements were being prepared at that time. Given that these were all estimates not based on the primary documents, why would these documents be the focus of any inquiry, as opposed to the major Joint Venture records kept at Mr. Sharma’s Millcreek premises?

[251] In my view, Trial Exhibit 6 and 30 (in particular the statements from 2009 to 2012 which the defendants focussed on) are some kind of reconciliation that Mr. Suleman attempted to do as part of his claim that the defendants owed him money at the end. In the later financial statements, he appears to have attempted to address items that had not previously been included in the early financial statements which were only estimates. I cannot say whether this was the appropriate manner of addressing the reconciliation from an accounting point of view, but his approach has raised concerns.

[252] I note as well that most of the alleged discrepancies set out in the defendants’ closing submission relate to accounting entries after 2008, the year that Rahim conducted his reconciliation and subsequently stopped working for the Joint Venture.

[253] The defendants also compared written answers which Mr. Suleman had prepared in 2017 in response to over 1100 written inquiries. They noted a total of 9 discrepancies in their closing submission from these inquiries—again, all of which occur after Rahim had conducted his final reconciliation as of January 2008. There is no need for me to review these in detail—they will all be addressed by the accounting I am ordering. I note that Mr. Suleman did have explanations for some (but not all) of these discrepancies, which appeared valid.

[254] It makes sense that there might have been issues with the accounting after Rahim left. Rahim was a sophisticated CA who worked at Mr. Sharma’s Millcreek premises, was the VP of Operations, had access to all the staff and records there, and used the Joint Venture’s primary accounting records. After he left, Mr. Suleman appears to have been left to figure out the accounting himself, without any access to GEAC. It was clear to me that Rahim is a far more skilled and sophisticated accountant than Mr. Suleman.

[255] A significant problem with some of the issues raised by the defendants is their continued focus on differences between what 1417217 Ontario paid the investor company 1507339 Ontario, and what 1507339 Ontario paid to the individual investors. It was Mr. Suleman’s lending companies that obtained loans from investors on whatever terms they agreed. Then, it was the lending company, 1507339 Ontario, that made loans to 1417217 Ontario using investor money. If 1417217 Ontario repaid interest and/or or profits to 1507339 Ontario, it is irrelevant if 1507339 Ontario did not then turn around and repay investors the exact same amount. The issue regarding what 1507339 Ontario owed its investors was between them and 1507339 Ontario, and the Joint Venture had nothing to do with the individual investors. For some reason, the plaintiffs have allowed defence counsel to get into these issues at trial and throughout the proceeding’s discovery. That may be, but I do not have to accept the relevance of this submission.

[256] I have already addressed the issue of the purported misappropriations through online transfers from 2002 to 2008 and have rejected that claim.

[257] The defendants also reference admissions made by Naheel and Rahim that certain entries which Mr. Suleman made in his trial balances between 2002 and 2008 that were reflected to be overhead/admin costs could not have been for overhead/admin. First, I point out again that in the early years, Mr. Suleman’s trial balances were a second set of records he kept to ensure there was sufficient cash. They were not the main records. Mr. Sharma had all the records related to payment of overhead/administration costs at his offices. Second, Rahim and Naheel both testified that Mr. Sharma had regular, if not daily, reconciliations of transactions. He would have seen all of these transactions. Rekha and Meena said he was good with numbers. There is no evidence he ever complained and, in my view, he implicitly accepted these transactions even if they may not have been properly described. As well, some of these transfers were to the investment company 1507339 Ontario. If money was owed to the investment company, even if improperly characterized, it is difficult to see any impropriety in this without any evidence that no sums were owed to 1507339 Ontario.

[258] I note that the defendants pleaded that Mr. Suleman breached his fiduciary duty and has also been unjustly enriched as a result of misappropriations. They did not specifically argue this in their closing submissions. Given the findings that I have made, these causes of action cannot succeed in any event.

U. The Necessity for an Accounting

[259] After Rahim left and Mr. Sharma passed away, it appears that Mr. Suleman took on a larger role in trying to reconcile the affairs of the Joint Venture. This was mostly in response to Meena’s demand for an accounting before she would release the River Trail proceeds.

[260] I have not found Mr. Suleman to have engaged in abusive or bad faith conduct as the defendants allege. At its highest, the records he kept after 2008 have discrepancies which have made it difficult to determine the overall status of accounts. Nevertheless, I am satisfied that this results in unfair consequences and prejudice for the Joint Venture, which includes the Estate, the successor of one of the joint venturers. Unfair consequences are sufficient to establish oppression under the oppression remedy.[^41]

[261] Given that the Estate has lost GEAC documents and the GEAC system, and conducted none of its own analysis, it would not be fair to begin the accounting before Rahim’s reconciliation of the Joint Venture’s accounts as of January 2008. In any event, I have found as a fact that his reconciliation as of January 2008 represents the state of affairs of the Joint Venture at that time.

[262] In all the circumstances, it would also be unfair to saddle Mr. Suleman with the cost of this accounting since the Estate has completely dropped the ball with respect to the final reconciliation and has apparently lost key documents. The Estate and the plaintiffs should share the cost equally.

[263] I am ordering an accounting by an Associate Judge pursuant to Rules 54 and 55 of the Rules of Civil Procedure. The accounting shall:

a. Determine the assets and liabilities of 1417217 Ontario that existed as of January 1, 2008. This shall take into account any assets owned by Sovereign which were still owned as of January 2008, and any other assets the parties prove were owned by the Joint Venture through associated corporations;

b. Determine what happened to these assets and liabilities after January 1, 2008;

c. Determine the expenses and revenues of 1417217 Ontario after January 1, 2008. In that regard, the River Trail and Black Creek proceeds, and any interest, shall flow into 1417217 Ontario and be taken into account;

d. Determine whether there are any assets left which may be sold and their value, if any;

e. Determine whether there are any remaining liabilities of 1417217 Ontario that must be paid;

f. Determine the overall profit of loss of 1417217 Ontario; and

g. Determine the total profits which must be paid to either Mr. Suleman or Mr. Sharma pursuant to their respective 1/3 and 2/3 profit share and/or any overpayment of management fees for which each of them may be liable;

[264] Even though I did not find that Mr. Suleman had misappropriated any specific funds related to the $552,000 letter of credit, the sale of Sovereign’s equipment or the $600,000 proceeds from the sale of the two last homes, the accounting that I am ordering will take into account these proceeds since they took place after 2008, and as such will address any concerns that the Estate has with respect to them.

[265] The accounting will also address and take into account all of the concerns that the defendants have about accounting entries made by Mr. Suleman from the years 2008 onwards because it will be an entirely new look at the relevant Joint Venture transactions. As I have said, most of the defendants’ concerns relate to this time period in any event.

[266] Finally, the accounting will address the status of the investment made by the investor company 1507339 Ontario into 1417217 Ontario, including payments repaid to the investor company as well as any amounts which remain to be paid. For this item only, I accept that the accounting should extend to the beginning of the Joint Venture. The Investment accounts were separate from GEAC and in my view it would be a very simple matter to consider how much was invested overall by 1507339 Ontario, how much was repaid overall, and how much remains outstanding using 1417217 Ontario’s bank records and other records if necessary. For clarity, payments from and to individual investors are not relevant since 1507339 Ontario was the investor corporation.

[267] I am not ordering the accounting of the overhead and administrative expenses prior to January 2008. There was significant evidence that Mr. Sharma was aware of all transactions prior to January 2008 and approved them. There was uncontradicted evidence that there were no invoices generated for such payments. It would be extremely difficult to unwind this issue given the ongoing oral approvals that were made, which have been corroborated by Naheel and Rahim. Furthermore, Mr. Sharma took no action to challenge any pre-2008 transactions, nor is there any evidence that any of his accountants raised any concerns about these.

V. Conclusion

[268] In summary I order as follows:

a. The Estate, River Trail Estates, Meena and Rekha are jointly and severally liable to the plaintiff 1417217 Ontario in the amount of $1,586,484 for the reasons I have set out above;

b. The Black Creek proceeds held in trust with any accrued interest shall be paid to 1417217 Ontario; and

c. Mr. Suleman’s accounting records post-2008 create unfair consequences and prejudice for the Joint Venture, which includes the Estate, and as such constitutes oppression. There shall be an accounting pursuant to Rules 54 and 55 of the Rules of Civil Procedure before an Associate Judge to determine the final state of accounts of 1417217 Ontario in accordance with the above.

[269] All other claims are dismissed. In that regard, the plaintiff had requested $50,000 in punitive damages from Rekha and Meena. Punitive damages should be resorted to in exceptional cases and with restraint. They are punishment for harsh, reprehensible and malicious conduct.[^42] Their conduct does not rise to this level. When Mr. Sharma suddenly passed away, the burden of completing his projects fell to his family. They did not have the expertise that he did and they were grieving. Part of their reason for resorting to self-help (which they should not have) was the fact that they could not understand Mr. Suleman’s calculations at Trial Exhibit 6 which he provided them at the time, and which I found wanting. What they did was wrong, but not reprehensible or malicious.

[270] There is an issue as to the interest payable on the $1,586,484 and the date from which it should be paid. If the parties cannot agree, then they may make submissions together with the necessary calculation of the precise interest they claim, which flows from their analysis. The plaintiffs’ submission on this issue shall be made within 15 days of these reasons and the defendants’ shall be made within 15 days thereafter.

[271] The parties may make submissions on costs in accordance with the above timeline. I note that there is a reserved issue on the costs payable to the defendants related to mid-trial productions and I will address that issue in my overall costs decision.

Papageorgiou J.

Released: November 2, 2021

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

1417217 ONTARIO INC. and MUSA SULEMAN

Plaintiffs

– and –

RIVER TRAIL ESTATES INC., 1639395 ONTARIO INC., REGALCRAFT HOMES INC., ESTATE OF MADAN SHARMA, REKHA SHARMA and MEENA SHARMA

Defendants

REASONS FOR JUDGMENT

Papageorgiou J.

Released: November 2, 2021

[^1]: R.S.O. 1990, c. B.16. [^2]: R.R.O. 1990, Reg. 194. [^3]: R v. Ceal, 2012 BCCA 19, 315 B.C.A.C. 138, at para 24. [^4]: R.S.O. 1990, c. E. 23. [^5]: Perry Estate v. Cholette, 2013 ONSC 4610, 90 E.T.R. (3d) 227, at para. 41; Burns Estate v. Mellon (2000), 2000 CanLII 5739 (ON CA), 48 O.R. (3d) 641 (C.A.), at para. 29; Botnick et al. v. The Samuel and Bessie Orfus Family Foundation et al., 2011 ONSC 3043, 71 E.T.R. (3d) 210, at para. 16, aff’d 2013 ONCA 225, 86 E.T.R. (3d) 6. [^6]: In Brisco Estate v. Canadian Premier Life Insurance Co, 2012 ONCA 854, 113 O.R. (3d) 161, at para. 61, the Court of Appeal stated that section 13 is drawn in broad terms to capture not only those who bring an action against the estate but those bringing an action on behalf of the Estate. [^7]: Exhibit 21. [^8]: Brisco Estate, at para. 52. [^9]: Trial Exhibit 6. [^10]: Trial Exhibit 2. [^11]: Counsel for the defendants objected to the admission of this document for the truth of its contents. It was prepared by Rahim and when Mr. Suleman testified it was not admitted for the truth of its contents but rather as part of the chronology of what occurred. Plaintiff counsel said that the document in question was in his client’s request to admit and he did not understand that the only thing admitted was authenticity. He requested leave to call the author of the document, Rahim. Defence counsel tried to argue that it was unfair to allow the author to testify, but he had the document in his possession throughout this proceeding. Indeed, it is the defendants who produced this document as part of their productions. Given that the defendants could have asked any questions he wanted about the document through the discovery process including questions from the author, I did not see any prejudice or unfairness in allowing the author to testify. I told the defendants I would give them an adjournment if required, and they did not want one. They wanted the trial to proceed. I allowed the witness, Rahim Suleman to testify. This issue arose on September 17, 2020. I ordered that the plaintiffs provide a willsay for the new witness and any documents by Sunday September 20, 2020. Rahim ultimately testified on October 2, 2020 and was not cross examined until October 19, 2020. According to the defendants’ written submission for costs thrown away as a result of the late production of documents, Rahim provided two bankers boxes of documents which they could have used to challenge his analyses but did not. Therefore, in my view the defendants had sufficient time to prepare taking into account any new documents and the willsay. As well, at the time defence counsel indicated that proceeding in this manner was fair and reasonable. [^12]: Exhibit 68. [^13]: Conklin v. Ontario, 2018 ONCA 726, at para. 7; Chand Morningside Plaza Inc. v. Healthy Lifestyle Medical Group Inc., 2019 ONCA 6, 46 C.P.C. (8th) 25, at para. 7. [^14]: 2011 SCC 24, [2011] 2 S.C.R. 261, at paras. 27-36. [^15]: 2018 ONCA 472, 141 O.R. (3d) 1, at para. 65, leave to appeal refused, [2018] S.C.C.A. No. 255. [^16]: At para. 65. [^17]: (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), aff’d [1997] O.J. No. 3754 (C.A.). [^18]: At para. 76. [^19]: At para. 74. [^20]: Transamerica, at p. 8. [^21]: 2014 ONCA 85, 372 D.L.R. (4th) 90, at para. 46. [^22]: I note that the plaintiffs never pleaded that Meena told Mr. Suleman that she would be holding the River Trail proceeds in trust. However, this could have not possibly taken them by surprise since it was Meena’s own evidence during her examination in chief at trial that she told him this. I see no unfairness in the plaintiffs relying upon and me accepting evidence she gave in chief , even if it was not pleaded by the plaintiffs. [^23]: 2019 ONSC 3654, 56 C.C.E.L. (4th) 112. [^24]: (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481 (C.A.). [^25]: 2011 MBQB 292, 273 Man. R. (2d) 34. [^26]: 1971 CanLII 28 (SCC), [1972] S.C.R. 640, at p. 646. [^27]: (1788), 30 E.R. 42 (Ch.). [^28]: Donovan Waters, The Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012). [^29]: (2002), 2002 CanLII 41834 (ON CA), 59 O.R. (3d) 74 (C.A.), at paras. 58-61. [^30]: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 68. [^31]: BCE Inc. [^32]: Badr v. 2305136 Ontario Inc., 2019 ONSC 4516, 98 B.L.R. (5th) 322, at paras. 30-35. [^33]: Badr, at paras. 30-35. [^34]: Hollinger Canadian Publishing Holdings Co. v. Mostad Publications Ltd., 2007 BCSC 1496, 36 B.L.R. (4th) 276, at paras. 40-42. [^35]: Hurontario Property Development Corp. v. Pinewood Business Interiors (2010), 2010 ONSC 260, 100 O.R. (3d) 261, rev’d in part 2011 ONSC 5476, 108 O.R. (3d) 359 (Div. Ct.). [^36]: Even though these Notices of Assessment clearly relate to 1417217 Ontario’s outstanding tax liability which Mr. Suleman had advised Rekha about in 2011, and even though the defendants had specifically pleaded that Mr. Suleman had failed to pay GST, there was also significant and lengthy objection raised by the defendants to the admission of these documents. The defendants argued that these documents were only produced one month before trial in the trial brief, and that this outstanding personal liability that Mr. Suleman has with the CRA as a director of 1417217 Ontario has never been pleaded. I permitted the admission of this evidence. One month before trial is enough time for disclosure. Further, Mr. Suleman was never making a claim against the defendants in respect of these Notices of Assessment. His point is that they are relevant to the overall accounting and that if moneys are returned to 1417217 Ontario as requested, then Mr. Suleman will not have any personal liability as a director as the returned funds will be used to pay these outstanding amounts. These Notices of Assessment are clearly relevant to the state of accounts as between the joint venturers and relevant to the reconciliation which Meena attempted to prepare which omitted these entirely. As well, Rekha admitted that Mr. Suleman had told her about these liabilities in 2009. [^37]: 2006 SCC 57, [2006] 2 S.C.R. 787. [^38]: (1893), 1893 CanLII 65 (FOREP), 6 R. 67 (H.L.). This rule adopted in Canada in Peters v. Perras (1909), 1909 CanLII 178 (SCC), 42 S.C.R. 244. [^39]: In my view, it was fair to cross-examine Mr. Suleman on records he prepared in furtherance of the defendants’ claim that his records were unreliable and an accounting was required. However, it was unfair to then attempt to use this evidence to establish specific misappropriations never pleaded. In any event, I find that the evidence does not establish any misappropriation with respect to online transactions for the reasons I have stated. [^40]: 2021 ONSC 3408, 154 O.R. (3d) 538. [^41]: BCE Inc., at para. 67. [^42]: See e.g. Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 19.