Court File and Parties

COURT FILE NO.: CV-22-0108-00 DATE: 2022 03 10 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KASHMIR KAUR RANDHAWA and SUKHDEV SINGH RANDHAWA – and – JASWANT DASS, GURPREET DASS and 5048942 ONTARIO INC.

BEFORE: Daley J.

COUNSEL: Bhupinder Nagra, for the Plaintiffs Kevin Sherkin and Nathan Lean, for the Defendants

HEARD: February 18, 2022

Endorsement

Introduction

[1] The defendants brought a motion seeking an order setting aside and discharging a certificate of pending litigation (“CPL”) which was issued by the registrar in accordance with an ex parte order dated January 12, 2022, which CPL was registered against a property municipally known as 136 Westmore Dr., Toronto, Ontario (the “Property”).

[2] The defendants’ motion was premised on two principal grounds, namely that the plaintiffs failed to make full and frank disclosure of material facts to the court at the time their ex parte motion was brought and in any event the affidavit evidence adduced on the initial motion and on the motion to set aside the CPL failed to satisfy the established test for the registration of a CPL.

[3] On March 7, 2022, I released a short endorsement granting the defendants’ motion setting aside the CPL with my detailed reasons for doing so. These are those reasons.

Evidentiary Record & Analysis:

[4] The action instituted by the plaintiffs involves claims for various forms of relief resulting from alleged oppression of their shareholder interests. In their statement of claim they also seek a CPL in respect of the Property which is ancillary to the principal relief sought.

[5] The evidence is clear that at no time have the plaintiffs had a direct ownership interest in the Property. They were minority shareholders in a company, 2035211 Ontario Inc. (“203”) which company was the former owner of the Property at the time the plaintiffs’ ex parte motion for the CPL came before the court.

[6] While it is a matter of dispute in the present action, as outlined in the affidavit material filed by both sides on this motion, the defendants’ evidence is that the plaintiffs sold their shares in 203 to the defendants and as such had no interest in that company. Notably, this evidence was not placed before the motions judge on the return of the ex parte motion.

[7] The record on this motion provides evidence that on August 28, 2019, the plaintiffs entered into a Share Pledge Agreement with 2705781 Ontario Inc. (“270”) whereby they agreed to pledge and assign their shares in 203 to 270. The existence of this Share Pledge Agreement, whereby the plaintiffs pledged their shares, was not disclosed to the court on the ex parte motion. Notably, this agreement was within the possession of the plaintiffs’ counsel prior to the return of the ex parte motion, and at least as of December 14, 2021, when counsel wrote to 270’s representatives advising that she had had an opportunity to consider the “pledge assignment of shares as security” agreement of August 28, 2019.

[8] Although the plaintiffs now dispute, on the present motion, the enforceability of the Share Pledge Agreement the affidavit evidence filed in support of the ex parte motion failed to disclose the existence of that agreement and the plaintiffs’ position with respect to it.

[9] On April 26, 2021, in furtherance to the Share Pledge Agreement, the plaintiffs are alleged to have executed a share purchase agreement transferring their shares in 203 to 2802116 Ontario Inc. (“280”). Subsequently, 203 and 208 amalgamated to form the defendant corporation 5048942 Ontario Inc. (“504”).

[10] In accordance with the share purchase agreement, the plaintiffs allegedly had agreed to sell their shares in 203 to 280 with the consideration payable as follows: $100,000 on August 29, 2019, and $400,000 payable on the earlier of (a) the completion of the construction on the project at the Property; or (b) May 2, 2024.

[11] Following the execution of the share purchase agreement the plaintiffs also executed resolutions transferring their shares and resigning as directors and officers of 203.

[12] After the amalgamation of 203 and 282 formed 504, the Property was transferred to 504.

[13] Notably, none of this evidentiary history was disclosed to the court on the return of the ex parte motion.

[14] In the responding affidavit dated February 16, 2022, on this motion filed by the plaintiff Kashmir Kaur Randhawa, she disputes that she agreed to assign or pledge shares in 203 and states that she did not include evidence on the ex parte motion with respect to that agreement, as she denies that her initials appear on the document as they purport to be, and she states: “I verily believe that those are not my initials”. She also states in her reply affidavit that she did not believe that the existence of the Share Pledge Agreement, which she disputes, was relevant for the purpose of the motion to secure the CPL.

[15] The deponent further denies that she signed a share purchase agreement and essentially alleges that the documentation purporting to represent that agreement is fraudulent or forged.

[16] Again, none of this history, or the alleged agreements and the plaintiffs’ position with respect to same was disclosed to the court on the ex parte motion.

[17] Furthermore, the evidentiary record submitted on behalf of the defendants on this motion outlines a lengthy and somewhat complex sequence of events involving the plaintiffs and other non-parties relating to other litigation concerning the Property, a construction project on the property, construction liens and specifically litigation in respect of which the defendants paid certain monies to discharge legal fees owing by the plaintiffs, as well as other costs associated with the Property, including the payment of unpaid taxes and the discharge of liens.

[18] Also, contrary to the evidence adduced on behalf of the plaintiffs, the Property is not for sale but rather is in the midst of significant development and construction.

[19] 504, in the course of developing the Property secured mortgage financing for an amount in excess of $20 million, which mortgage is registered as against the Property. The mortgage terms do not allow for any encumbrances to be registered on the Property and as such the presence of the CPL on title jeopardizes that financing as no further advances would be provided by the lender with the title encumbered by a CPL.

[20] The proper evidentiary record that is required to obtain leave to register a CPL on an ex parte motion is provided for in rule 39.01 (6) of the Rules of Civil Procedure which provides: “(6) Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application”.

[21] The plaintiffs elected to proceed with their motion on an ex parte basis and as such were bound to comply with the terms and the spirit of rule 39.01 (6). That enhanced level of disclosure precludes the moving party from the right to simply present its side of the case only, rather it is incumbent on the moving party to make a balanced presentation of the facts and law. The moving party must state its own case fairly and must inform the court of any points of fact or law unknown to it which favour the other side: United States v Friedland, [1996] O.J. No. 4399; Moses v Metro Hardware and Maintenance Inc. et al., 2020 ONSC 6684.

[22] I have concluded that on the threshold question the plaintiffs failed to make full and fair disclosure of all material facts and therefore on that basis alone the CPL should be discharged from title.

[23] Despite having reached this conclusion, I will consider the equitable factors to be examined having regard to a party's right to register a CPL.

[24] In asserting that they had an “interest” in the Property the plaintiffs left in evidentiary void or gap in the true history of their relationship with the defendants and as to the status of the Property which was clearly fully within their knowledge at the time their motion was brought. Similarly, various documents relevant to these issues were in their possession and not disclosed to the court. The evidence upon which I base these conclusions is set forth above.

[25] For the completeness of these reasons, I will also address the plaintiffs’ failure to meet the evidentiary burden upon them at the first instance and as well upon this motion to discharge the CPL.

[26] On considering a motion to discharge a CPL the court must consider whether there is a triable issue that the party having register the CPL has an interest in the land. Once that question has been determined, the court then considers the equitable factors as between the parties in order to properly exercise its equitable jurisdiction: 2526716 Ontario Inc. v. 2014036 Ontario Ltd, 2017 ONSC 1762.

[27] As to whether there is a triable issue having regard to the plaintiffs having an interest in the Property, I have concluded that there is no such triable issue.

[28] At its highest, the plaintiffs had a minority shareholder interest in 203, the corporation that previously owned the Property and the prima facie evidence on this motion is that the plaintiffs entered into a Share Pledge Agreement and Share Purchase Agreement whereby they sold their interest in 203 prior to the institution of their action. At no time have the plaintiffs had a direct personal interest in the Property.

[29] Furthermore, if it was determined by the court that there was a triable issue in respect of whether the plaintiffs sold their shares in 203, and the plaintiffs were successful in advancing that claim, they would still only have a shareholder interest and not a direct interest in the Property itself.

[30] I have considered the equitable factors to be examined, as established by Master Donkin in his decision, in 572383 Ontario Inc. v. Dhunna, [1987] O.J. 1073 and I have concluded that on the whole of the evidentiary record and the weighing of those factors, the record favours the discharge of the CPL.

[31] The plaintiffs have claimed substantial damages in their statement of claim and if they are successful in all respects, they may have a claim to a 45% shareholder interest in 504, the company that presently owns the Property. Further, there is no evidence to support the plaintiffs’ submission that the defendants intend to dissipate or transfer the property.

[32] As to the harm that may be occasioned by the CPL remaining on title, the evidence is uncontradicted that the defendants will be in violation of their financing agreement and mortgage terms such that they will be unable to pay trades and suppliers involved in the construction project and may face the termination of funding by the lender.

[33] In the result and for these reasons, the defendants’ motion was granted as per my endorsement released on March 7, 2022, and the draft order filed.

[34] Counsel for the parties shall serve and file submissions as to costs in accordance with the terms of the order entered discharging the CPL.

Daley, J. Released: March 10, 2022