COURT FILE NO.: CV-18-2406-00 DATE: 2024 04 18

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

ANISH GUPTA and GURPAL SANI, Plaintiff J. Macdonald, for the Plaintiff

- and -

KAMALJIT CHAUHAN and GURBIR CHAUHAN, Defendants T. Laan, for the Defendant

HEARD: May 8th -18th, 2023 in person

REASONS FOR DECISION

JUSTICE BARNES

Introduction

[1] After a non-jury trial, Mr. Anish Gupta and Gurpal Sani (the Plaintiffs) are awarded a judgment against Kamaljit Chauhan and Ms. Chauhan (the Defendants). The Plaintiffs and the Defendants were partners in the purchase, renovation and sale of lands at 7164 Para Place, Mississauga (Para Place) and 13330 Torbram Road, Caledon (Torbram Road).

[2] Mr. Gupta, Mr. Sani and Mr. Chauhan agreed to carry on the business of buying, selling and renovating properties for profit. They purchased, renovated and sold Para Place for that purpose. This case is about whether Tobram Road was part of that agreement; whether they conducted business as co-owners or partners and who is entitled to the sale proceeds of Torbram Road.

Background Facts

[3] The parties’ Statement of Agreed Facts provides sufficient background facts. The agreed facts are reproduced here. Mr. Gupta and Mr. Sani have known each other since 2011. Mr. Gupta is a realtor. Mr. Chauhan is a proprietor of a retail liquidation store.

[4] Mr. Gupta, Mr. Sani and Mr. Chauhan discussed partnering in a real estate investment in 2016. They agreed to share the costs, expenses and time in purchasing and renovating a property and to share equally in any profit obtained from the sale of the property.

[5] Mr. Gupta introduced Mr. Sani and Mr. Chauhan to a property that was listed for sale at Para Place. Mr. Gupta, Mr. Sani and Mr. Chauhan agreed that Mr. Gupta would purchase Para Place. Mr. Gupta entered into an agreement of purchase and sale (APS) to purchase Para Place on July 25, 2016 (“Para Place APS”). The purchase price was $513,000.

[6] Mr. Gupta paid the deposit of $10,000 under the Para Place APS on July 30, 2016. Mr. Gupta collected Mr. Sani’s and Mr. Chauhan’s contributions to the Para Place purchase. He deposited these contributions in his bank account.

[7] Rinku Gupta (Ms. Gupta) is Mr. Gupta’s wife. Mr. Gupta, Ms. Gupta and Mr. Chauhan applied for a mortgage loan to complete the purchase of Para Place. CIBC provided a mortgage to Mr. Gupta, Ms. Gupta and Mr. Chauhan for $410,150. This money was used to purchase Para Place.

[8] The sale of Para Place was completed on October 28, 2016. Mr. Gupta, Mr. Sani and Mr. Chauhan made renovations to Para Place in November and December of 2016.

[9] Jap Ji Lawyers Professional Corporation acted for the purchasers under the Para Place APS. The contents of the Trust Ledger and Statement of Adjustments prepared by Jap Ji Lawyers Professional Corporation are not disputed.

[10] On December 16, 2016, Street Capital Corporation provided a bridge loan of $138,400 with Para Place as collateral. Torbram Road was purchased on December 6, 2016. The $138,400 was used to complete the purchase.

[11] Mr. Gupta, Mr. Sani and Mr. Chauhan agreed to sell Para Place on January 9, 2017, for $607,000. This sale was completed on January 27, 2017. The proceeds of the sale were used to pay the entire amount outstanding under the bridge loan.

[12] Mr. Chauhan sold Torbram Road without advising Mr. Gupta and Mr. Sani. This sale was completed on May 8, 2017. James Lockyer, a lawyer, acted for Mr. Chauhan and his wife Ms. Chauhan to complete the sale of Torbram Road. Mr. Chauhan and Ms. Chauhan received $418,742 from the proceeds of the sale of Torbram Road, which they deposited in their joint bank account.

[13] Mr. Chauhan and Ms. Chauhan kept all of the proceeds from the sale of Torbram Road. They used the $418,742 to purchase a property at 12 Burlwood Road, Brampton (“Burlwood”). Mr. Chauhan and Ms. Chauhan agreed to purchase Burlwood on May 10, 2017, for $1,465,000. Mr. Chauhan and Ms. Chauhan completed the purchase of Burlwood on July 28, 2017.

[14] Mr. Chauhan and Ms. Chauhan transferred $599,919.58 from the same bank account in which they had deposited the proceeds of the sale of Torbram Road to complete their purchase of Burlwood.

[15] James Lockyer acted for Mr. Chauhan and Ms. Chauhan in the purchase of Burlwood. Mr. Chauhan and Ms. Chauhan have resided at Burlwood since July of 2017. Mr. Chauhan and Ms. Chauhan did not provide any proceeds of sale from Torbram Road to either Mr. Gupta or Mr. Sani.

[16] On June 8, 2018, the Plaintiff Mr. Gupta issued a Statement of Claim, claiming the parties were partners and that Para Place and Tobram Road were partnership assets. Mr. Gupta sought a declaration that the Plaintiffs were beneficial owners of Burlwood by contract, or in the alternative, by way of a resulting and constructive trust. The Plaintiff sought other related relief. Mr. Sani was not a party at this time.

[17] On October 18, 2018, the Defendants responded with a Statement of Defence, stating that there was a limited partnership agreement between Mr. Chauhan, Mr. Gupta and the then non-party Mr. Sani for the sole purpose of purchasing, renovating and selling Para Place, and that this agreement did not extend to Torbram Road. Secondly, they stated that this was an illegal partnership because Mr. Gupta entered the agreement in violation of his duties as a realtor. This second ground was not advanced during the trial and has since been abandoned. On October 24, 2018, the Plaintiffs issued a reply, primarily refuting the claim that there had been a breach of a realtor’s duty.

[18] The Plaintiffs issued an amended Statement of Claim dated December 12, 2018, adding Mr. Sani as a Plaintiff. The Defendants issued an amended Statement of Defence on October 18, 2018. The Plaintiffs were granted a Certificate of Pending Litigation for Burlwood on September 27, 2018.

Issues

[19] There is no written agreement between the parties on the terms of their agreement. The parties, however, agree that there was an agreement between Mr. Sani, Mr. Gupta and Mr. Chauhan to purchase, renovate and sell Para Place for a profit. They agree that Para Place was purchased, renovated and sold for profit and the proceeds of the sale were to be divided equally between Mr. Gupta, Mr. Sani and Mr. Chauhan. Though the Defendants never pleaded a co-ownership relationship concerning the Para Place property, they assert this at this trial.

[20] In their amended Statement of Defence, the Defendants state that Mr. Chauhan entered into a limited agreement with Mr. Gupta only and not Mr. Sani for the sole purpose of purchasing, renovating and selling Para Place.

[21] The crux of this dispute is the nature of the legal relationship between the parties concerning the purchase and sale of the Para Place and Torbram Road properties. Three questions must be answered:

a) Did the parties enter into an oral contract to be partners or co-owners? b) Are the Defendants in breach of any duties flowing from the legal relationship? c) If there is a breach, what is the appropriate remedy?

Summary of the Evidence

Plaintiffs’ Evidence:

Mr. Gupta

[22] Mr. Gupta said that, in or about mid-2016, he and Mr. Sani discussed working together to purchase real estate properties as an investment. Mr. Sani later mentioned that Mr. Chauhan may be interested. The three of them met on several occasions to discuss this possibility. In the fall of 2016, they came to a verbal agreement to invest in real estate as partners. The plan was to purchase properties, make improvements, and then sell the houses at a profit.

[23] There was no written agreement. As partners, they agreed to contribute to the costs, expenses and time spent in relation to the purchase and renovation of an investment property. As partners, they agreed that the three of them would equally share in any profit obtained from the sale of such a property. They agreed that while their contributions in money may not be equal during each phase of the partnership, they would ensure that everyone was treated equally per their contributions of money and time.

[24] Mr. Gupta introduced the partnership to Para Place in the summer of 2016. They agreed to purchase, renovate and sell this property. They entered into an APS to purchase Para Place on July 25, 2016. He acted as the real estate agent for and negotiated the purchase on behalf of the Partnership. He disclosed his interest as a realtor to his partners by providing a document entitled “Registrant’s Disclosure of Interest” to Mr. Sani and Mr. Chauhan. Mr. Sani and Mr. Chauhan approved of the purchase. Mr. Gupta said he signed the APS on behalf of the Partnership. He was listed as the sole buyer.

[25] Para Place was purchased for $513,000. The closing date was October 28, 2016. He paid the initial deposit of $10,000 on July 30, 2016. He was responsible for holding the contributions from Mr. Sani and Mr. Chauhan. Mr. Sani contributed $65,500 between October 13, 2016, to October 28, 2016, and Mr. Chauhan contributed $40,000 on October 16, 2016, by a certified cheque.

[26] Mr. Gupta said he told his partners Mr. Sani and Mr. Chauhan that he was in the process of listing and selling his house at 30 Abitibi Lake Drive, Brampton and once that property was sold, he would be in a better position to contribute further to the Partnership. They agreed. He kept a handwritten ledger book in which he recorded each partner’s contribution towards the Partnership. The ledger shows contributions in the amount he has previously described. In total, the Partnership contributed $115,500. Mr. Sani’s contribution includes a last-minute contribution of $10,000 to cover an unexpected shortfall in funds to cover closing costs.

[27] The Partnership needed a mortgage loan of approximately $410,000 to complete the purchase of Para Place. Mr. Chauhan, Mr. Gupta and his wife applied to the Canadian Imperial Bank of Commerce for a mortgage loan. The bank required that all three of them be placed on title as registered owners of Para Place and provided a mortgage of $410,150. They all understood that Mr. Gupta, Mr. Sani and Mr. Chauhan as partners were the real owners of the property.

[28] The purchase of Para Place was completed on October 28, 2016. He had already paid the deposit of $10,000. $105,000 in his bank account represented the pooled resources of himself, Mr. Sani and Mr. Chauhan. He wrote a cheque to their real estate lawyers Jap Ji Lawyers Professional Corporation for the required deposit. $3000 remained in his bank account to cover the mortgage and carrying costs of Para Place.

[29] As the cooperating broker, he received a commission on the purchase of $8,242, which he paid to Mr. Chauhan to offset the differences in their contributions. Between November and December of 2016, the three of them made renovations to Para Place. He made the mortgage payments during those months and in January of 2017. The mortgage payments were $1,638.00 per month. He paid $4,919.70 for three months. He paid the property insurance at $420.27 and electricity at $330. He also made some payments toward renovations as indicated in his handwritten ledger. He contributed $7,893. Mr. Sani contributed a further $12,977 and Mr. Chauhan a further $9,620. The renovation expenses were all paid in cash.

[30] Mr. Gupta said before the purchase of Para Place was completed the partnership agreed to purchase Torbram Road as an asset of the Partnership. The Partnership needed to borrow $138,000 to purchase Torbram Road. On December 6, 2016, the money was borrowed from Street Capital Financial Corporation to complete the purchase. The bridge loan was secured by a mortgage registered against Para Place. Minhas LLP managed the sale transaction of Para Place and the purchase transaction of Torbram Road on behalf of the Partnership. The plan was to sell Para Place and pay off the bridge loan.

[31] Mr. Gupta said Para Place sold for $607,000 on January 9, 2017, and that the Partnership was pleased with the profit. The bridge loan which had been used to pay Torbram was paid off in full using the proceeds from the proceeds of Para Place.

[32] Mr. Gupta said he located the Torbram Road property and told Mr. Sani and Mr. Chauhan that it was for sale. All three of them visited and inspected Torbram Road. Ms. Chauhan did not visit Torbram Road. They decided to purchase it. They negotiated directly with the listing agent Tav Schembri. They agreed that Mr. Chauhan would sign the APS as Mr. Chauhan was confident that he and his wife would qualify for a mortgage. Mr. Gupta and Mr. Sani did not think they would qualify for a mortgage. Mr. Chauhan signed the Torbram Road APS “in trust” for the partnership.

[33] Ms. Chauhan and Mr. Chauhan received a mortgage for Torbram Road for $608,000. Mr. Gupta said financing for Torbram was handled similarly to financing for Para Place. Mr Chauhan advised him and Mr. Sani that he and his wife would get the financing for Tobram. He later advised that they had been approved for the mortgage. Mr. Chauhan and Ms. Chauhan were to be placed on title to Torbram a similar arrangement to Para Place. He and Mr. Sani did not object.

[34] The bridge loan was used as the down payment. Mr. Sani, Mr. Chauhan and Mr. Gupta all understood that Tobram Road was an asset of the partnership. This is why they all agreed to the bridge loan using Para Place as collateral.

[35] Mr. Gupta said he and Mr. Sani went to the Town of Caledon town hall shortly after they entered the APS for Torbram Road. The purpose was to discuss the removal of trees at Torbram Road. These trees were blocking the view of the property. He and Mr. Sani worked on removing the trees at Torbram.

[36] Mr. Gupta said he, Mr. Sani and Mr. Chauhan went to visit an architect, Harpreet Bhons to discuss the possible demolition and rebuild of Torbram Road. This was per their initial plan for Torbram.

[37] The Torbram Road purchase was scheduled to close on December 1, 2016, but closed on December 6, 2016. The purchase price was $760,000.00. Mr. Gupta said after he returned from India in early 2017, Mr. Chauhan informed him and Mr. Sani that he had sold Torbram. This was shocking because the three of them had not selected an agent for the sale of Torbram Road. According to Mr. Gupta, Mr. Chauhan became non-communicative after Torbram Road was sold. He rebuffed his and Mr.Sani’s efforts to obtain an accounting from him.

[38] Mr. Gupta said that before the sale of Torbram Road, Mr. Sani, Mr. Chauhan and he agreed that any excess proceeds of the sale of Para Place would be shared equally. He and Mr. Sani received their share from Minhas LLP for $21,283.36 – exactly 2/3 of the excess proceeds. Mr. Chauhan received $10,641.67 – exactly 1/3 of the excess proceeds. He explained that they each received one-third because that was the equal division of their three-person Partnership.

[39] Mr. Sani asked him to give his share to Mr. Chauhan so that Mr. Chauhan would have money to pay for the mortgage and carrying costs at Torbram Road. Mr. Gupta said he paid $10,000.00 of Mr. Sani’s share of the proceeds to Mr. Chauhan on January 31, 2017. Mr. Gupta paid Mr. Chauhan only $10,000 because he had paid $1000 on January 23, 2017.

[40] Mr. Gupta said Mr. Chauhan and Ms. Chauhan misappropriated all of the net proceeds from the sale of Torbram Road. The amount misappropriated from the Partnership was $418,742. That amount was used by Mr. and Ms. Chauhan to purchase their current residence at 12 Burlwood Road.

Paul Sani

[41] Mr. Sani said he, Mr. Gupta and Mr. Chauhan agreed to enter into a partnership to buy, renovate and sell properties for profit. Mr. Gupta approached him with the idea first. Mr. Sani then brought in Mr. Chauhan. Discussions began in 2015 and culminated in 2016. They found properties in Caledon too expensive so they settled for a property in Brampton. This was Para Place. The three of them agreed to buy Para Place in September of 2016.

[42] He said Mr. Gupta and Ms. Gupta did not qualify for a mortgage on their own so they agreed that Mr. Chauhan could go on title. Mr. Gupta put down $10,000 as the deposit. They agreed that Mr. Gupta would keep track of their respective contributions. Mr. Chauhan contributed $40,000 via a cheque. Mr. Sani said he contributed $65,000. They agreed to share the proceeds of the sale equally.

[43] Mr. Sani said Mr. Gupta paid the mortgage and insurance for Para Place. They each made contributions to the renovation of Para Place. Mr. Gupta’s notations of their respective contributions are accurate.

[44] Before Para Place was sold, Mr. Gupta told him and Mr. Chauhan about Torbram Road. The three of them inspected Torbram Road and decided to buy it as part of the partnership’s business. They agreed to take a bridge loan secured by Para Place to buy Torbram Road. They agreed that Mr. Chauhan and Ms. Chauhan would go on the title and obtain the mortgage for Torbram Road, and that Mr. Chauhan would pay the carrying costs for Torbram Road. This plan was carried out.

[45] Mr. Sani said that the three of them attended and inspected Torbram Road often. He said that he and Mr. Gupta obtained a permit from the City and cut down trees on the Torbram Road property. Mr. Chauhan was aware of this. He said he wanted to flip the Torbram Road property. Mr. Chauhan and Mr. Gupta wanted to demolish Torbram and build anew. He introduced them to an architect. Eventually, they came round to his way of thinking and decided to sell Torbram Road.

[46] Mr. Sani said that as part of the maintenance of Torbram Road, he asked his friend Haspinder Alak to use his truck plow to clear the snow on the Torbram Road driveway on a couple of occasions.

[47] Mr. Sani said he never spoke to Ms. Chauhan and that she never visited Torbram Road.

[48] Mr. Sani said Para Place was sold after they had purchased Torbram Road. He said the proceeds of the sale were just over $30,000 and it was shared equally between the three of them. Mr. Sani said he asked Mr. Gupta to pay Mr. Chauhan his share of $10,000 to help pay the carrying costs of Torbram Road. The proceeds of the Para Place sale were used to pay off the bridge loan.

[49] He said he asked his friend Gurpaul Persaud, a real estate agent, to list Torbram Road for sale. This was in March of 2017. Mr. Persaud brought in an offer of $950,000. Mr. Gupta said this offer was too low so they rejected it. Sometime thereafter, Mr. Gupta travelled to India.

[50] Mr. Persaud subsequently brought forward an offer for $1,050,000. He and Mr. Chauhan were pleased. They had purchased Torbram Road for $760,000 and were pleased with the increase. Mr. Sani was in the hospital for heart surgery at the time. They accepted the offer without consulting Mr. Gupta. He told Mr. Chauhan that if he did not survive the surgery, Mr. Chauhan should divide his share of the proceeds among his children.

[51] In May 2017, Mr. Sani had a heart bypass operation. He was in recovery for about one month. Once he recovered, on multiple occasions he contacted Mr. Chauhan for an accounting. Mr. Chauhan kept stalling. Eventually, he became non-communicative.

[52] Mr. Sani said he borrowed $30,000 from Baljinder Singh. He withdrew $10,000 in cash from his Canadian Tire Card. He owes $300,000 to the CRA.

Harshpinder Aulakh

[53] Mr. Aulakh is a friend of Mr. Sani. He said he knows Mr. Gupta and Mr. Chauhan. He said that on three or four occasions he went to Torbram Road at the request of Mr. Sani to plow snow on the driveway. During these visits, he saw Mr. Sani and Mr. Chauhan on separate occasions. He has spoken to Mr. Sani but has never spoken to Mr. Gupta or Mr. Chauhan.

[54] He was never told that Torbram Road was owned by Mr. Chauhan and Ms. Chauhan. Mr. Sani told him that he was partners with Mr. Chauhan and Mr. Gupta.

Baljinder Singh

[55] Mr. Singh said Mr. Sani is his friend. In October of 2016, Mr. Sani came to his office with Mr. Chauhan. He lent Mr. Sani $30,000 in cash. Mr. Sani has not paid him back yet. Mr. Sani told him that he needed the money to purchase some property in Mississauga. He did not know that Mr. Sani was investing in Para Place. Mr. Singh said he has known Mr. Chauhan since the day he lent Mr. Sani the money.

Gurpal Persaud

[56] Mr. Persaud said he met Mr. Sani first in 2002. He sold Mr. Sani’s home in 2015. Mr. Sani introduced him to Mr. Chauhan. They met at Mr. Chauhan’s furniture liquidation shop. He said they initially talked about business and then discussions evolved into real estate investments. Mr. Sani told him about the Torbram Road property. They asked him if he could get them that listing.

[57] Mr. Persuad said no one was living on Torbram Road at the time. Mr. Sani and Mr. Chauhan dealt directly with the listing agent for the property. After Mr. Sani and Mr. Chauhan purchased Torbram Road, he became the listing agent for the sale of Torbram Road.

[58] He said, after the sale, he received a one percent commission for selling Tobram Road. The APS was signed on April 4, 2017. There was no document signed at that time. He took the APS to Ms. Chauhan and Mr. Chauhan. Mr. Sani was present when Mr. and Ms. Chauhan signed the APS. They were all elated and celebrated the sale together. After the closing, he delivered the residual cheque to Mr. and Ms. Chauhan at Mr. Chauhan’s store.

[59] Mr. Persaud said Mr. Sani did not tell him which properties they were investing in. Mr. Sani and Mr. Chauhan told him there was a third partner, but he never met that person. Mr. Sani and Mr. Chauhan never discussed any of the terms of their investment.

Respondent's Evidence:

Mr. Chauhan

[60] Commencing sometime in 2014, Mr. Gupta and Mr. Sani began to attend his liquidation store. The visits started in 2014, first with Mr. Gupta and then with Mr. Sani.

[61] Mr. Chauhan’s evidence is that Mr. Gupta first suggested buying, renovating and selling properties. He and Mr. Gupta agreed to purchase Para Place for this purpose. At some point, Mr. Gupta advised that Mr. Sani would become part of the agreement to purchase Para Place. Mr. Gupta said whoever put in more money would have more shares.

[62] Mr. Chauhan said he contributed $80,000 to Mr. Gupta for the Para Place purchase, in three installments as follows:

a) $30,000 in cash on October 15, 2016; b) $40,000 by bank draft on October 16, 2016; c) $10,000 in cash on October 27, 2016.

[63] He said he raised the initial $30,000 from Sukjinder Johal ($10,000), Jasmir Singh (Ladi) ($10,000), and Ravi Shankar ($10,000). The cash was provided to Mr. Gupta on October 15, 2016.

[64] He made the $40,000 contribution by bank draft. His parents Jagtar Chauhan and Rajinder Kaur gave him $10,000, which he gave to Mr. Gupta on October 27, 2016.

[65] Mr. Chauhan said Mr. Gupta did not have enough money to complete the down payment and requested additional funds. As a result, he contributed an additional $40,000 by bank draft.

[66] In the spring of 2016, he and Ms. Chauhan began to search for a new residence to accommodate his parents and their children. They viewed Torbram Road and decided to purchase on September 15, 2016. They entered into an APS with a closing date of December 1, 2016. Mr. Chouhan and Ms. Chauhan were the only persons on the title.

[67] The purchase price was $760,000. Mr. Chauhan paid the deposit of $25,000. A mortgage for $608,000 was arranged. Para Place did not sell before the Torbram Place purchase was set to close. Since he had contributed the most money to the Para Place purchase, he, along with Mr. Gupta and Mr. Sani, agreed to raise a bridge loan against the security of Para Place for $138,400. This amount was used as a down payment to purchase Torbram Road.

[68] Mr. Chauhan said he alone made contributions toward the purchase price, the mortgage and all expenses relating to Torbram Road. Mr. Gupta and Mr. Sani did not contribute any money towards the purchase or acquisition of Torbram Road. On May 5, 2017, he and Ms. Chauhan sold Torbram Road for $1,050,000. He and Ms. Chauhan used the net proceeds to purchase Burlwood. The title was in their names. He resides at1, Burlwood with his parents, Ms. Chauhan and their children.

[69] His dealings with Mr. Sani and Mr. Gupta were limited to the purchase and sale of Para Place and the arrangement, advancement and payment of the bridge loan. There was never any discussion with them about a business arrangement involving Torbram Road or Burlwood.

[70] Mr. Gupta never provided an accounting of the purchase and sale of Para Place. He invested $80,000 on the total downpayment of 102,500. Therefore his share of the investment is 78%.

Ms. Chauhan

[71] Ms. Chauhan said she had no information on, and was not involved in, any dealings involving Para Place. She confirmed Mr. Chauhan’s evidence that Torbram Road was purchased to house her family without the involvement of Mr. Gupta and Mr. Sani.

[72] She inspected Torbram Road with Mr. Chauhan. They discussed whether it was suitable for their family. She never saw Mr. Sani and Mr. Gupta at Torbram Road and never discussed the sale of Torbram Road with them. There was never a celebration because Torbram Road had been sold.

Sukjinder Johal, Sarabjit Singh, Jasmir Singh and Ravi Shankar

[73] Sukjinder Johal, Sarabjit Singh, Jasmir Singh and Ravi Shankar all confirm that they each lent Mr. Chauhan $10,000 in 2016 to purchase a property. They all provided this money in cash and have not received payment for the money they advanced.

Rajinder Kaur

[74] She is Mr. Chauhan’s mother. She confirmed that she and her late husband gave Mr. Chauhan $10,000 in October of 2016.

Applicable Principles

[75] The Plaintiff's pleadings are based on the premise that the parties were carrying on a business in common as partners with a view to profit. Para Place and Torbram Place were partnership properties. The Respondents pleaded it was a partnership limited to Para Place. Despite this, the Respondents submit Para Place was a co-ownership carrying on a business with a view to profit.

[76] The Plaintiffs bear the onus of proving upon a preponderance of the evidence that the business relationship between the parties was a partnership: Hornstein v. Kats et al., 2020 ONSC 870, 131 O.R. (3d) 532, at para. 193.

[77] A relationship is a partnership when persons carry on a business in common with a view to profit: Partnerships Act, R.S.O. 1990, c. P.5, s. 2 (the Act). Co-ownership alone is not sufficient to constitute a partnership: Partnerships Act, s. 3(1). The sharing of profits between co-owners does not transform the relationship between them from co-ownership to partnership: Partnerships Act, s. 3(2).

[78] In a partnership, no member of the partnership is permitted to deal with their share in the property separate from the share (s) of the co-partner (s): A.E. LePage Ltd. v. Kamex Developments Ltd., 16 O.R. (2d) 193 (C.A.).

[79] Unless the parties agree otherwise, property purchased with money belonging to the partnership is deemed to be property of the partnership: Partnerships Act, s.22.

[80] The relationship between persons carrying on business in common for profit is a co-ownership where the persons agree that each of them can deal with their share of the property separately: Kamex Developments Ltd.

[81] Unless the parties agree otherwise, property purchased by a co-owner from their share in the property they co-owned belongs only to the said co-owner: Partnerships Act, s. 21(3).

[82] All partners are “entitled to share equally in the capital and profits of the business”: Partnerships Act, s. 24(1).

[83] Partners must account to their partners “for any benefit derived by the partner without the consent of the other partners from any transaction concerning the partnership or from any use by the partner of the partnership property, name or business connection”: Partnerships Act, s. 29(1).

[84] A partner is bound to do their best for the partnership and share with their co-partners the benefit they derive from the use of the property of the partnership: Nathaniel Lindley, Lindley on the Law of Partnership, 12th ed. (London: Sweet & Maxwell, 1962), at p. 344. That which is acquired from the use of partnership property must be brought into the partnership account: Rochwerg et al. v. Truster et al., 58 O.R. (3d) 687 (C.A.), at paras. 37-38.

[85] Partners owe a fiduciary duty to each other. This duty imposes a strict code of conduct which includes “duties of loyalty, utmost good faith and avoidance of conflict of duty and self-interest”: Rochwerg et al., at para. 36.

[86] Except where inconsistent with the express provisions of the Act, the rules of equity and of common law applicable to partnerships apply: Partnerships Act, s. 45.

[87] A court has the discretion to impose equitable remedies after the breach of a fiduciary relationship within a partnership. The purpose is to deter fiduciary faithlessness and preserve the integrity of the fiduciary relationship: Nguyen v. Adas, 2022 ONSC 2541, at para. 58.

[88] A beneficial ownership can be imposed on a property based on a resulting trust. A resulting trust arises in a situation “where a person advances a contribution to [a] purchase … without taking legal title”: Andrade v. Andrade, 2016 ONCA 368, 131 O.R. (3d) 532, at para. 58.

[89] When there is no agreement reduced to writing the court must adopt a contextual approach and objectively assess the words and actions of the parties to determine if there was an intent to be bound by an enforceable contract and if so the terms of the said contract. In effect, determining if such a contract is one of partnership or co-ownership: Hornstein, at para. 192.

Position of the Parties

The Plaintiffs

[90] None of the Defendants are credible and their evidence should be rejected. The Defendants have admitted that they invested in Para Place as partners and, without consent or leave of the court to withdraw their admission, they cannot submit that the investment in Para Place was as co-owners. The Defendant's submission that they were co-owners must fail because it was not pleaded.

[91] Mr. Gupta’s records on contributions made to the Para Place purchase should be accepted over the Defendants’ testimony and records. The Defendants’ suggestion that the Plaintiffs agreed that the bridge loan could be used to assist the Defendants in purchasing Torbram Road does not make sense and must be rejected as commercially absurd. The Defendants’ concession that Mr. Sani, Mr. Gupta and Mr. Chauhan initially agreed to purchase Torbam Road is new and is a further illustration of the absurdity that the bridge loan on the partnership property (Para Place) was to be utilized for a purpose unrelated to the business of the partnership.

[92] The Plaintiffs’ evidence of active participation in all activities involving Torbram Road should be preferred over the Defendants’ evidence. Torbram Road was purchased as property of the partnership. The proceeds of the sale of Para Place and Torbram Road are the property of the partnership.

[93] The Defendants misappropriated said property and used it to purchase Burlwood. Such action was a breach of Mr. Chauhan’s fiduciary duty as a co-partner. Ms. Chauhan was aware that she and Mr. Chauhan were misappropriating the property of the partnership. Therefore, the Plaintiffs have a beneficial interest in Burlwood as partners or via the equitable remedies of a constructive trust or resulting trust.

[94] Mr. Chauhan’s impugned conduct is a serious breach of his fiduciary duty as a co-partner and warrants a punitive damage award.

[95] The Plaintiffs seek a declaration that Para Place and Torbram Road were bought and sold as properties of the partnership and that they are beneficial owners of Burlwood as partners and by a constructive trust or resulting trust.

[96] The Plaintiffs seek an order that Burlwood be sold. In the alternative, they seek damages and compensation in the sum of $279,133.41 to remedy Mr. Chauhan’s breach of fiduciary duty and Ms. Chauhan’s knowing receipt of partnership funds to purchase Burlwood.

[97] The Plaintiffs seek $50,000 in punitive damages against Mr. Chauhan.

The Defendants

[98] The Defendants submit that Mr. Chauhan, Mr. Gupta and Ms. Gupta held the Para Place property in co-ownership and flipped it. They were not partners. There was no partnership with Mr. Chauhan, Mr. Gupta and Mr. Sani concerning Para Place or Torbram Road.

[99] The Defendants’ evidence on contributions to the downpayment for Para Place should be accepted. Should the court be unable to decide which version of downpayment contributions to accept, then the Plaintiffs would have failed to discharge their onus to prove the existence of a partnership.

[100] There are inconsistencies in the Plaintiffs’ evidence that should lead the court to reject the evidence of the Plaintiffs. Thus, the court should accept the version of events described by the Defendants in their entirety.

[101] The evidence of the Plaintiffs lacked credibility. There was no certainty of contract terms. The parties' discussion is devoid of sufficient detail to ascertain with any certainty the terms of the agreement. For example, there is no information on what resources were to be shared, whether any sharing would be limited only to financial resources, how non-financial resources were to be valued, whether profits were to be shared equally or according to contributions, whether expenses were to be shared equally or in another fashion, what was to happen if one party was to decide to stay in the property and what improvements were to be made to the property.

[102] The evidence demonstrated that the parties were a loose consortium of individuals who would look for properties and purchase, renovate and sell them on an ad-hoc basis. There is conflicting evidence on whether the evidence was to be shared equally or per contribution.

[103] At the highest, the bridge loan registered against Para Place creates a debt owed by the Defendants to the Plaintiff Mr. Gupta and his wife Ms. Gupta.

[104] Mr. Chauhan contributed $80,000 to the Para Place project. He only received $10,000 from that investment.

[105] If the court is unable to determine who made the cash investments for the purchase, then the Defendant Mr. Chauhan is prepared to pay two-thirds of the bridge loan to compensate Mr. Sani and Mr. Gupta for any equitable claims they may have.

Analysis

[106] The Defendants are unsuccessful in the defence of this action. The Defendants admitted that the Para Place business was carried on as a partnership. This admission was not withdrawn. The Defendants did not plead that the Para Place business was carried on as a co-ownership. The Defendants are not credible and their version of events is rejected. The Plaintiffs’ version of events is accepted. In all the circumstances, the parties intended Para Place and Torbram Road to be partnership property. Whether via partnership or co-ownership, the Plaintiffs have an interest in Burlwood via a resulting trust.

Pleadings

[107] At paragraph 14 of their Statement of Defence, the Defendants stated, “[o]n January 30, 2017, the Partnership sold 7164 Para Place for $607,000.00. The sale proceeds were divided equally amongst Kamaljit, Paul, and Anish. This concluded the Limited Agreement between Kamaljit, Paul, and Anish.” Within this context, including the admissions summarized previously, the Defendants have agreed that the Para Place business was a partnership. The Defendants did not seek leave to withdraw this admission as required by r. 51.05 of the Rules of Civil Procedure. The admission stands. The Defendants' admission of partnership extends only to Para Place and not to Torbram Road.

[108] Rule 27.07(1) of the Rules of Civil Procedure requires the Defendants to admit every allegation of fact in the Plaintiffs’ pleading that they do not dispute. Where the Defendants intend to rely on a version of facts different from that pleaded by the Plaintiffs the Defendants are required to plead their version of facts: r. 25.07(3) of the Rules of Civil Procedure. The Defendants did not plead that the business in common between the parties (Para Place) was a co-ownership. Therefore, the Defendants cannot rely on an assertion of co-ownership as a defence. Based on these two violations of the Rules, the defence must be unsuccessful. I address other grounds for the failure of the defence advanced below.

[109] Mr. Gupta failed to fulfill his undertakings made at his discoveries to produce his Royal Bank (RBC) statements for July 2016 to the end of February 2017. He also failed to produce cancelled cheques relating to the purchase and sale of Para Place.

[110] Mr. Gupta disclosed only page two of his RBC statement for the period October 11, 2016 to November 10, 2016. The missing pages are crucial because it covers the period during which the Plaintiffs allege that Mr. Sani made a contribution of $65,000 to the Para Place purchase and could also corroborate the cash contributions Mr. Gupta said he received during that period.

[111] In cross-examination, Mr. Gupta conceded that he did not report his income or loss from the alleged partnership in his 2016 and 2017 tax returns.

[112] Mr. Sani conceded that he swore an affidavit adopting Mr. Gupta’s trial affidavit without reading Mr. Gupta’s affidavit. In cross-examination, Mr. Sani for an inexplicable reason seemed reluctant to concede that he was a real estate investor.

[113] Mr. Sani was reluctant to concede that he was a partner in a gas station business which led to some tax problems and a $300,000 judgment against him.

[114] Mr. Sani did not disclose his income or losses for the alleged partnership on his 2016 and 2017 tax returns.

[115] These factors cause me to approach the evidence of Mr. Sani and Mr. Gupta with caution.

[116] In their initial pleadings, the Defendants plead that Mr. Chauhan’s contribution to Para Place was $40,000. After the Plaintiffs amended their Statement of Claim and added Mr. Sani as a party, the Defendants revised their pleadings to increase the amount contributed by Mr. Chauhan to $80,000. Mr. Chauhan laid the blame for this at the feet of his former counsel.

[117] Mr. Chauhan and Ms. Chauhan testified they discovered Torbram Road while on a drive looking for potential properties to buy as the new family residence. In examination in chief, Mr. Chauhan said upon seeing Torbram Road he discussed it with the real estate agent. He said he did not discuss Torbram Road with Mr. Sani and Mr. Gupta. He and Ms. Chauhan eventually decided to sell Torbram Road because it was too small to house their family. In the absence of a partnership agreement, on this version of events it borders on commercial absurdity that Mr. Sani and Mr. Gupta would agree to a bridge loan secured on Para Place to allow the Defendants to purchase Torbram Road.

[118] In effect, according to the Defendants, Mr. Sani and Mr. Gupta agreed to allow Mr. Chauhan to leverage Para Place in an amount which exceeded Mr. Chauhan’s contributions solely for Mr. Chauhan’s benefit. Such an interpretation is not reasonable, particularly for a group of individuals who began the enterprise to make a profit. It is more reasonable that a property of the partnership (Para Place) was leveraged to purchase another property of the partnership (Torbram Road) using a similar financing strategy, i.e. obtaining a mortgage in the name of the person most likely to be successful on a mortgage application.

[119] In their written submissions, the Defendants submit that Mr. Chauhan, Mr. Gupta and Mr. Sani initially agreed to buy Torbram Road. However, Mr. Sani and Mr. Gupta did not have the resources to buy Torbram Road, so Mr. Chauhan decided to go it alone. This contradicts the testimony of Ms. Chauhan and Mr. Chauhan. However, this explanation is not “in harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable”: Hornstein, at para. 194. Based on this version of events, despite the paramount objective of purchasing, renovating and selling properties for a profit, the first course of action of Mr. Sani and Mr. Gupta was to walk away from Torbram Road because they could not qualify for a mortgage on their own. Further, they not only walked away, they agreed to leverage the one asset they hoped to make a profit from so that Mr. Chauhan could purchase Torbram Road solely for his benefit.

[120] Even if I were to accept Mr. Chauhan’s assertion that he contributed more money to the Para Place down payment, the version of events the Defendants put forward is not reasonable. It is more reasonable that Mr. Sani, Mr. Gupta and Mr. Chauhan would agree to move forward in a manner consistent with the Para Place purchase.

[121] The behaviour is consistent with the previous business strategy, i.e. obtaining a mortgage in the names of the persons most likely to qualify for the mortgage. For Para Place, this was Mr. Gupta, Ms. Gupta and Mr. Chauhan. I note that Ms. Gupta was not part of the agreement to purchase, renovate and sell Para Place for profit, and despite his absence from the title it was understood that Mr. Sani was part of the business and entitled to share in the profits from Para Place.

[122] For Torbram Road, the persons most likely to qualify for a mortgage was Ms. Chauhan and Mr. Chauhan. As noted, the absence of Mr. Sani and Mr. Gupta from title is not determinative. The Torbram Road purchase followed the same business strategy and it would be incredulous to accept that if Para Place could be used to buy another property in furtherance of the business, Mr. Gupta and Mr. Sani agreed to use the equity in Para Place to help purchase Torbram Road solely for the benefit of Mr. Chauhan. Such a conclusion is patently unreasonable.

[123] Though not determinative of whether this business in common was as partners or co-owners, there is evidence which leads to an adverse inference on the credibility of Ms. Chauhan and Mr. Chauhan.

[124] The Defendants insist that there was no celebration with Mr. Sani after Torbram Road was sold. The real estate agent Mr. Persaud said there was. There is no credible basis to reject Mr. Persaud’s evidence. His evidence contradicts the Defendants. On a balance, I am satisfied that the Defendants were not truthful on this point. I reject their evidence on this point. I find that Mr. Sani and the Defendants celebrated after Torbram Road.

[125] Mr. Harshpinder Aulakh testified that on at least three or four occasions he cleared the snow at Torbram Road at the request of Mr. Sani. The Defendants refute this. There is also no credible basis to reject his testimony. I find the Defendants’ account to be untruthful and reject it. At Mr. Sani’s request, Mr. Akulah cleared snow from the driveway of Torbram Road.

[126] Mr. Persaud and Mr. Aulkah’s confirmatory evidence on these aspects of how the parties interacted with Torbram Road is sufficient to alleviate my concerns about the credibility of Mr. Sani and Mr. Gupta.

[127] The Defendants are not credible and sought to mislead the court. Except where the Defendants' evidence constitutes an admission or is supported by other evidence not generated by them, I reject their evidence in its entirety. I accept the version of events as advanced by the Plaintiffs. I conclude that Torbram Road was part of the business in common with Mr. Sani, Mr. Gupta and Mr. Chauhan.

[128] The Defendants’ position on Torbram Road is even more unreasonable when considered in the context of the admission that Para Place was owned by a partnership. Within that context, it is unreasonable to conclude that Mr. Sani and Mr. Gupta would consider a bridge loan on a partnership property to acquire another property solely for Mr. Chauhan’s benefit.

[129] Ms. Chauhan was not involved in any fashion in Mr. Sani, Mr. Chauhan and Mr. Gupta’s discussions and agreement on Para Place. She had no knowledge of the specifics of that partnership except information she received from Mr. Chauhan that Mr. Gupta would be providing money from the Para Place sale and that money would be used to facilitate the purchase of Torbram Road. Ms. Chauhan knew of the financial link between Para Place and Torbram Road. It is reasonable to conclude that among the Defendants, the primary person in the Torbram Road transaction was Mr. Chauhan. Ms. Chauhan just went along with what he wanted done.

[130] There is no credible basis to reject the evidence of Sukjinder Johal, Sarabjit Singh, Jasmir Singh, Ravi Shankar and Rajinder Kaur describing the various cash loans they advanced.

[131] For reasons previously articulated, except where introduced as an admission, I reject the Defendants' version of any monies contributed to both the Para Place and Torbram Road business in common and accept the Plaintiffs’ version of these contributions. I accept all calculations advanced by the Plaintiffs in this trial.

[132] The parties agreed to purchase, renovate and sell Para Place to profit. The terms were not reduced to writing, but I conclude that the parties' oral agreement (contract) was subject to some clear and precise rules including terms that they agree to share the costs, expenses and time in purchasing and renovating the two properties, and to share equally in any profit obtained from the sale of these properties.

[133] At trial, each of the parties complained about not receiving and accounting. Mr. Chauhan complained about not getting an accounting from Mr. Gupta on Para Place. Mr. Chauhan’s complaint was levelled even though the proceeds of Para Place were shared equally among the parties. Mr. Sani and Mr. Gupta complained that Mr. Chauhan did not provide an accounting for Torbram Road. It is reasonable to conclude that it was the intention of the parties that the equal division of profits would be subject to an accounting. This accounting was grounded in the record-keeping of a single person for each of the two properties.

[134] Mortgages were obtained by the persons who were best placed to receive a successful outcome upon a mortgage application. It is reasonable to conclude that the parties intended that one of them on the mortgage would function as the record keeper for their contributions. For Para Place, it was Mr. Gupta and for Torbram Road, it was Mr. Chauhan.

[135] The oral agreement was clear, certain and simple. It relied on accurate record-keeping and financial accounting. Put simply, they intended that their contributions shall be tracked by a designated recorder and equal division of profits shall be adjusted for contributions made by each party.

[136] The parties agreed to purchase Torbram Road before Para Place was sold. The agreement that Para Place would be used as security for the bridge loan to purchase Para Place and the use of the proceeds of the sale of Para Place to discharge the bridge loan demonstrates that there was an agreement to acquire Torbram Road as part of the business in common.

[137] The parties intended to treat Para Place and Torbram Road as part of their business in common. It was never the intent of any of the parties that any of them could dispose of their share of the property separately from the others. The parties intended that Para Place and Torbram Road properties would always be treated as partnership property. This was not a co-ownership: Neither party was at liberty to dispose of his share separately. This is the only reasonable conclusion to be drawn from all of the evidence, including the Defendants' concession that Para Place was a partnership, the other agreed facts and the Plaintiffs’ version of the activities taken in furtherance of the business, including the renovation, repair, maintenance and upkeep of Para Place and Torbram Road, and the conception, rationale and implementation of the bridge loan transaction. Even without the Defendants’ concession on the partnership issue, the only reasonable inference remains an intention among the parties to conduct business as partners.

[138] The Plaintiffs’ evidence of active participation in all activities involving Torbram Road is preferred over the Defendants’ evidence. Torbram Road was purchased as property of the partnership. The proceeds of the sale of Para Place and Torbram Road are the property of the partnership.

[139] It is not disputed that the Defendants used the proceeds from the sale of Torbram Road to purchase Burlwood. Therefore, in failing to account to the Plaintiffs for the proceeds from the sale of Torbram Road, the Defendants misappropriated the said property and used it to purchase Burlwood. Such action was a breach of Mr. Chauhan’s fiduciary duty as a co-partner. Ms. Chauhan was aware that she and Mr. Chauhan were misappropriating the property of the partnership.

[140] In effect, the Plaintiffs made a monetary contribution to the purchase of Burlwood but are not on title to that property. Burlwood was purchased for $1,465,000 and is currently worth $1,900,000. Therefore, the Plaintiffs have a beneficial interest in Burlwood as partners and via the equitable remedy of a resulting trust.

Punitive Damages

[141] The Plaintiffs’ request for punitive damages against Mr. Chauhan is dismissed. There can be no punitive damage award in the absence of an “independent actionable wrong”: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 31. Punitive damages cannot be "simply on the basis of a party's misconduct”: Hornstein v. Kats, 2021 ONCA 293, at para. 6.

[142] There is no independent actionable wrong attributable to Mr. Chauhan. Punitive damages cannot be awarded simply based on his misconduct.

Conclusion

[143] The parties carried a business in common with a view to profit in relation to Para Place and Torbram Road as partners. The Defendants misappropriated the property of the partnership using it to purchase Burlwood. The Defendant Mr. Chauhan breached this fiduciary duty to the partnership. The Defendant Ms. Chauhan was aware of this breach. Hence the orders I have outlined below.

[144] The Plaintiffs are beneficial owners of land at 12 Burlwood Road, Brampton (“Burlwood”) as partners and by way of a resulting trust.

[145] Plaintiff Anish Gupta shall provide the Defendants with an accounting of financial contributions and expenses concerning Para Place within 45 days.

[146] The Defendant Mr. Chauhan shall provide the Plaintiffs with an accounting of financial contributions and expenses concerning Torbram Road within 45 days.

[147] The monetary judgments set out below shall be adjusted in accordance with the accounting provided. Absent consent on the adjustments, the parties may approach the court for direction.

[148] The Plaintiffs are awarded damages and compensation in the sum of $279,133.41 plus pre and post-judgment interest of 20%. Payment shall be made in 60 days failing which Burlwood shall be sold.

[149] Burlwood shall be listed for sale immediately upon the expiration of the 60 days for the payment of the $279,133.41 as set out above.

[150] The percentage interests of each of the Plaintiffs in the present value of 12 Burlwood shall be as follows:

a) May 10 2017 purchase price $1465,000 b) Partnership Contribution to Purchase $418,742 c) Defendants’ contribution to Purchase $181,177 d) Partnerships Share (418,742/599,919) 70% e) Mr. Gupta’s Share 1/3 23% f) Mr. Sani’s Share 1/3 23% g) Value of Burlwood 1,900,000

[151] Should the parties be unable to agree on costs, the Plaintiffs are to submit cost submissions in 15 days. The Defendants are to submit their cost submissions 15 days thereafter. Cost submissions shall be no more than 5 pages.

Justice K. Barnes Released: April 18, 2024