COURT FILE NO.: CV-24-00713514-00CL, CV-23-00705174-0000 DATE: 20240731 ONTARIO SUPERIOR COURT OF JUSTICE [Commercial List]

BETWEEN:

PARAMJIT CHEEMA, also known as PARAMJEET CHEEMA, HARCHAND DHALIWAL and SWARNJIT JHAJJ Applicants – and – SUKHDEV DHALIWAL and WORLD WIDE CARRIERS LTD. Respondents

BEFORE: Justice Jana Steele COUNSEL: Sanj Sood and Max Munoz, counsel for the applicants Philip Underwood and Annecy Pang, counsel for the respondent, Sukhdev Dhaliwal DATE HEARD: June 27, 2024

Endorsement

Overview

[1] This matter arose following the breakdown in the relationship among family members involved in a business together. The motion and the underlying application (the “Application”) concern the management of the respondent, World Wide Carriers Ltd. (“WWC”), and a number of its related companies (the “WW Group”). The applicants, Paramjit Cheema (“Cheema”), Harchand Dhaliwal (“Harchand”), and Swaranjit Jhajj (“Jhajj”), bring a motion seeking, among other things, a declaration of the court that the respondent, Sukhdev Dhaliwal (“Sukhdev”), is in breach of a court Order. However, the applicants also seek access to voluminous documentary information about WWC and access to WWC’s premises and electronic systems. The applicants allege that Sukhdev has not been operating WWC in the ordinary course of business as required by the Order, among other things.

[2] As discussed below, the relationship between Sukhdev and the applicants has significantly deteriorated. Although WWC is the profit centre of the WW Group, there are numerous companies in the WW Group, some of which are controlled by the applicants and some of which are controlled by the respondent, Sukhdev. Both the applicants and Sukhdev appear to have taken steps to economically harm or thwart the other through their companies.

[3] For the reasons set out below, I find that Sukhdev has breached the Order. However, I decline to compel WWC to grant the applicants access to WWC’s physical premises or electronic systems. I have determined that the applicants ought to continue to receive the documents and information that they would have received under the Business Corporations Act (Ontario) (the “OBCA”) had they continued as directors of WWC. The rest of the documentary requests are denied.

Background

[4] The applicant, Harchand, is Sukhdev’s older brother. The other two applicants are brothers in law of Harchand and Sukhdev. The four brothers and brothers in law have been in business together for many years.

[5] WWC and other companies in the WW Group carry on a commercial trucking and logistics business and own real estate. Within the WW Group there are several companies that are owned and operated by some or all of the family members. WWC is the heart and profit centre of the WW Group.

[6] World Wide India (“WWI”) was the provider of approximately 60-70% of the support services to WWC. The applicants each own 25% of the shares of WWI, Sukhdev owns approximately 5% of the shares of WWI, and another related party in India owns the balance of the shares of WWI. Sukhdev is a director of WWI. None of the applicants are directors of WWI.

[7] The Application is a dispute about the ownership of the shares of WWC. Specifically, Sukhdev’s position is that he is the sole shareholder of WWC. The applicants allege that the actual share ownership of WWC is 25% each and the corporate records are inaccurate.

[8] On August 29, 2023, Sukhdev held a shareholders’ meeting and executed a resolution to remove the applicants as directors and officers of WWC. His ability to do so is one of the matters contested in the Application.

[9] Following the meeting, on August 31, 2023, Sukhdev wrote an email to all the employees to advise them that the applicants were removed from their positions as directors and officers of WWC on August 29, 2023.

[10] On or about August 29, 2023, the applicants served their notice of application.

[11] The applicants subsequently brought a motion on an urgent basis for a mandatory injunction to reinstate them as officers and directors of WWC and to nullify the corporate actions since their removal.

[12] Shin Doi J. dismissed the portion of the applicants’ motion related to their reinstatement as officers and directors of WWC and the nullification of the corporate actions since their removal. However, in the Order dated October 3, 2023 (the “October Order”), Shin Doi J. ordered Sukhdev to continue acting in WWC’s best interests and to avoid taking steps that would be “prejudicial to the rights and interests of the Applicants,” which was defined as follows:

(i) directly or indirectly selling, assigning, encumbering, disposing of, or otherwise transferring any assets, shares, or interest in the Corporation; (ii) causing the Corporation, to issue any shares; (iii) directly or indirectly selling, assigning, encumbering, disposing of, or otherwise transferring the business of the Corporation; (iv) taking steps outside of the “usual and ordinary course of business”, including with respect to the day-to-day management and operations of the Corporation and its assets; and (v) effecting a “fundamental change” to the Corporation as set out in section 168 of the Business Corporations Act (Ontario)...

[13] In April 2024, the applicants sought an interlocutory injunction to gain access to WWC’s office and systems. That request was rejected by Wilton-Siegel J. holding that the October Order “does not give the applicants a right to employment with WWC”, and that the applicants “are not entitled to participate in the on-going management of the Corporation.”

[14] The Application is scheduled to be heard on October 30 and 31, 2024.

[15] Further background can be found in Shin Doi J.’s reasons, Cheema v. Dhaliwal, 2023 ONSC 6693 (the “Reasons”).

Issues

[16] The following issues arise on this motion:

a. Did Sukhdev breach the October Order? b. Are the applicants entitled to compel production of a broad array of financial and operational documents from WWC? c. Are the applicants entitled to an order compelling WWC to grant the applicants access to its physical office and electronic systems?

Analysis

Did Sukhdev Breach the October Order?

[17] I am satisfied that Sukhdev breached the October Order.

[18] Rule 60.12 of the Rules of Civil Procedure provides that, where a party fails to comply with an interlocutory order, the Court may, in addition to any other sanction provided by these rules, make such order as is just. The applicants request that the Court declare that Sukhdev breached the October Order and requests various other orders. I am prepared to grant the declaratory relief. However, it is not appropriate to grant the other orders sought.

[19] In the Reasons, Shin Doi J. expressed concern of the risk of damage to the applicants if the respondents were not required to act in the best interests of WWC and without prejudicing the applicants. Essentially, the status quo was to be held until the hearing of the Application on a full record. I note the following statements from Shin Doi J.’s endorsement:

a. Para. 21: “I agree with the Applicants that there is real risk of damage to the Corporation and its business if the Respondents are not restrained to act in the best interests of the Corporation and without prejudice to the Applicants. There would be no amount of money that could compensate the Applicants for loss of their ownership, control, and oversight of the family business.” [Emphasis added.]

b. Para. 22: “I conclude that the Applicants would suffer irreparable harm if the Respondents are not restrained from exercising their powers including taking any measures with respect to the ownership, management, business, or operation of the Corporation, that are prejudicial to the rights and interests of the Applicants.” [Emphasis added.]

c. Para. 23: “The balance of convenience favours maintaining the steps Sukhdev took in August 2023 but imposing restraints on Sukhdev and the Corporation to act in the best interests of the Corporation and without prejudice to the Applicants.”

d. Para. 24: “Given that the parties have an 18-year track record of operating a successful family business that employs 180 people and the Corporation has professional advisors, the requirements imposed on the Respondents to act in the best interest of the Corporation and without prejudice to the Applicants as shareholders would not be vague. The interim interlocutory order requires the Respondents to act in the ordinary course of business.”

[20] Reading Shin Doi J.’s endorsement with the October Order in my view assists with the interpretation of the October Order and what actions were restrained pending the hearing of the Application.

[21] The applicants provided a list of the following actions taken by Sukhdev that they submit individually and/or collectively constitute a breach of the October Order by Sukhdev, including:

a. Taking the position that the applicants are not, and have never been, employees of WWC; b. Making changes to the applicants’ compensation and benefits conferred on them and their families; c. Removing the applicants’ access to documents and systems; d. Moving WWC’s offices to new premises and barring the applicants from attending these premises; e. Transferring almost $1 million from other companies in the WW Group, of which the applicants are the registered majority shareholders, to WWC without the applicants’ knowledge; f. Causing WWC to divert business from other companies in the WW Group to WWC; g. Causing WWC to assume obligations the applicants assert are out of its ordinary course by acquiring and leasing trucks and trailers, and engaging drivers, at a time when WWC is allegedly suffering financial difficulties; h. Causing 2029037 Ontario Inc. (“202 Ontario”), another company in the WW Group of which the applicants are majority shareholders, to guarantee some of these loans and leases, without the applicants’ knowledge; i. Terminating the employment of Sharanjit Dhaliwal, Harchand’s spouse, without cause; and j. Terminating WWC’s long-standing relationship with WWI.

[22] Sukhdev submits that the directors of a company are in the best position to determine what is in the best interests of the company. Further, Courts defer to the board’s judgment as long as a business decision “lies within a range of reasonable alternatives:” BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560 at para 40.

[23] In addition, the Sukhdev notes that there is no universal standard for what is in the “ordinary course of business.” Instead, the Court is required to “consider the circumstances of each case:” Robitaille v. American Biltrite (Canada), [1985] 1 SCR 290 at para. 3.

[24] The language in the October Order provides that Sukhdev is prohibited from “taking steps outside of the “usual and ordinary course of business”, including with respect to the day-to-day management and operations of the Corporation and its assets.”

[25] Certain of the actions, on their own, are not outside the ordinary course of business and therefore, would not be sufficient to constitute a breach of the October Order. For example, the termination without cause of an employee of WWC is a decision made in the ordinary course of business: Harris c Blais, 2022 QCCS 3846 at para. 159. Further, actions such as engaging drivers and leasing trucks and trailers would be in the ordinary course. The hiring of owner operators was also criticized by the applicants. Aside from being in the ordinary course, the applicant Cheema signed an offer letter to one of the owner operators in December 2023.

[26] There are other actions that have been taken by Sukhdev that may be outside the ordinary course of business, such as certain inter-company transfers. The applicants’ evidence is that their salaries were historically paid by other companies in the WW Group, which relied upon transfers from WWC. Cheema and Jhajj have been paid by 202 Ontario, while Harchand has been paid by World Wide Truck and Trailer, another company in the group. The applicants’ evidence is that “[s]ince the dispute began [...] Sukhdev has refused to consistently send funds to 202 Ontario.” However, Sukhdev’s evidence is that the applicants have removed money from the business and have improperly withheld money owing to World Wide ASG Logistics Inc. (all of the shares of which are held by Sukhdev) or WWC from two companies the applicants control: JCD Cartage Inc. and World Wide Carriers US Inc.

[27] In my view, the actions taken by Sukhdev related to WWI, in particular, are troublesome. Since 2016, WWI has been the primary provider of WWC’s operational support, including dispatch, safety and compliance, customer support, pricing, sales and customs, border operations, and accounting. Sukhdev terminated WWI and moved the business to a new company controlled by him. On March 25, 2024, after the first set of cross-examinations in connection with this motion had concluded, Sukhdev sent an email to the applicants advising them that WWC was terminating WWI’s services effective April 1, 2024. The email from Sukhdev states that the decision to terminate the services was based on “two primary factors,” one of which was the litigation:

a. “Ongoing Litigation: As you may be aware, we are currently involved in active litigation, which necessitates a reassessment of our business relationships. In light of this situation, we must terminate our engagement with your company.” b. “Service Quality Concerns: [...]”

[28] The applicants subsequently discovered that the business previously conducted by WWI had been transferred to Peel Logistics Pvt Ltd. (“Peel Logistics”), a company that was incorporated by Sukhdev on October 16, 2023. Sukhdev holds 98% of the shares of Peel Logistics.

[29] As noted above, the applicants are the primary shareholders of WWI. However, Sukhdev, not the applicants, is a director of WWI. Accordingly, to the extent that there were any service quality concerns at WWI, he was in a better position to ensure that such quality concerns were addressed, and any problematic personnel were replaced. Further, a significant number of employees from WWI have been hired by Peel Logistics.

[30] Part of running WWC in a manner consistent with the ordinary course of business presumably would be maintaining the primary third-party service provider contract with WWI, a company owned by all the brothers. Instead, Sukhdev terminated this long-standing contractual relationship on a week’s notice. When the inclusive language used in the October Order in the definition of what is “prejudicial to the rights and interests of the Applicants” is taken into consideration, I think there can be no question that the change of a key service provider is a step outside of the usual and ordinary course of business, including with respect to the day-to-day management and operations of the company.

[31] Sukhdev was aware of the October Order. The October 3, 2023 endorsement issued by Shin Doi J. restrained Sukhdev “from exercising [his] powers, or acting or conducting business, in a manner that is prejudicial to the rights and interests of the Applicants or not in the best interests of the Corporation, until the Application is determined.” Sukhdev was at all times represented by legal counsel. Shin Doi J. referred to the 18-year track record of WWC when she stated, at para. 24 of the Reasons, that “the requirements imposed on the Respondents to act in the best interests of the Corporation and without prejudice to the Applicants as shareholder would not be vague.”

[32] I am satisfied that Sukhdev has breached the October Order.

[33] Under Rule 60.12 of the Rules of Civil Procedure the Court can make any order it deems just. The applicants are seeking access to WWC, their email accounts and the reinstatement of certain benefits, among other things.

Are the applicants entitled to access to WWC’s physical office and electronic systems?

[34] I am not satisfied that the applicants are entitled to compel production of all the financial documents (discussed below) and/or access to WWC’s physical office and electronic systems, nor am I prepared to order this remedy as a result of the breach of the October Order. I agree with Sukhdev’s submission that the applicants are trying to get an order to give them greater control over WWC, which is contrary to the October Order.

[35] When the applicants were before Shin Doi J., among other things, they asked for an order putting them in charge of WWC, which was rejected by the Court. Shin Doi J. noted, at para. 23, that nullifying the corporate governance measures taken by Sukhdev “would effectively hand the Applicants majority control of the Corporation.” She declined to do so and determined that: “The balance of convenience favours maintaining the steps Sukhdev took in August 2023 but imposing restraints on Sukhdev and the Corporation to act in the best interests of the Corporation and without prejudice to the Applicants.”

[36] The applicants again sought an interlocutory order requiring Sukhdev to restore their access to the premises of WWC and access to a software program at a conference before Wilton-Siegel J. on April 29, 2024. Wilton-Siegel J. noted at para. 3 that he did not have the benefit of a full record and stated that these matters would be more appropriately addressed at the motion before me with a complete record. He declined to order an interim or interlocutory injunction. At paras. 8 and 10 of his endorsement, he made the following comments about the October Order:

[8] The guiding principle of the Order is that the applicants, in their capacities as potential shareholders, are entitled to a continuation of the existing business of the corporation but not to any role in the management of the business. The Order left management of the business entirely in the hands of the respondent with the proviso that he was only entitled to carry on the business in the ordinary course and could not undertake any non-ordinary course transactions that would effect a material change in the business of the Corporation. I would add that, pending a resolution of the ownership of the Corporation, it would not be practical to have the business of the Corporation carried on in any other manner. Given the acrimony between the parties, it is not feasible for the applicants to have any management in the Corporation. The interest which they are entitled to have protected is that the Corporation does not change its business or operations in any material manner.

[10] It is important for this purpose that the applicants are not directors of the Corporation. The Order also does not give the applicants a right to employment with the Corporation nor does it give them any right of “supervision.” It also does not give them a right of access to the premises of the Corporation. Their rights in these respects will follow from the adjudication of their claim to ownership of shares in the Corporation. I acknowledge that in paragraph 21 of the Reasons Shin Doi J. refers to the fact that the respondent had agreed to give the applicants access to the Corporation so that they could continue to do work and be engaged in the business. She did not however make that a right. Circumstances have changed as discussed below in a manner which renders that relationship impractical. [...]

[37] The applicants submit that continued access to the premises was a key representation made to the Court by Sukhdev and underpinned the relief granted. However, I agree with Wilton-Siegel J. that the relationship between the parties has significantly deteriorated such that it would not be practical to give the applicants access to WWC so they could continue to work. Among other things, there was dangerous situation that ensued on April 10, 2024. An employee of WWC tried to move a forklift and two of the applicants blocked the truck with their personal vehicle on a public highway and sent it back to WWC’s yard, where they blocked it again. The police were involved. While the truck was in WWC’s yard, the respondent’s evidence is that the applicants unlocked the truck’s trailer, dangerously leading the trailer to become disconnected in the middle of an active roadway.

[38] Another example of the deterioration of their relationship involves the use of other companies in the WW Group by the applicants as leverage. For example, the applicants hold the majority of the shares of a holding company in the WW Group that owns land in Winnipeg, 87 Mountainview Road Holdings Inc. The applicants used their voting block to remove Sukhdev as a director and officer of Mountainview.

[39] The applicants also removed Sukhdev as an officer and director of 202 Ontario, the company that owned the land upon which WWC previously operated. After issues arose regarding the terms of a proposed lease between 202 Ontario and WWC, Sukhdev made the decision to move WWC to new premises.

[40] The ongoing litigation between the parties and various actions taken by both sides has amplified the animosity between them. Accordingly, given the level of hostility between them, it would not be prudent or safe to require the respondents to permit the applicants to attend at WWC’s premises at this time. I note, in particular, the incident involving the blocking of the truck.

[41] Management of WWC remains in the hands of Sukhdev. However, Sukhdev is required to act in accordance with the October Order pending the hearing of this matter. The adjudication of the claim in October 2024 will dictate the rights of the parties vis-à-vis WWC going forward.

Are the applicants entitled to compel production of a broad array of financial and operational documents from WWC?

[42] The applicants seek an order requiring Sukhdev and WWC to immediately provide extensive documentation to the applicants, specifically:

a. Fulsome disclosure to the Applicants of the Corporation’s financial position, by providing them with complete access to, and copies of, the Corporation’s financial information, from August 2023 to the date that an order is made by the court to this effect, and then going forward on a monthly basis, until this Application is heard, including, without limitation: i. Trial Balances and Balance Sheets; ii. Cash Flow Statements, Income Statements, and Profit and Loss Statements; iii. Expense reports; iv. Accounts Receivable and Accounts Payable reports; and v. All underlying source documents underpinning the aforementioned financial reports; b. Fulsome disclosure of any documents that impact the Applicants’ interest, including, without limitation: i. Copies of communications with third parties, including Bank of Montreal, regarding credit facilities which the Applicants, their families, or other companies of which the Applicants are shareholders, are guarantors, and/or borrowers; and ii. Copies of communications with third parties regarding the Applicants’ or their families automobile insurance payments or automobile payments; c. Copies of any material contracts which Sukhdev has caused the Corporation to enter into since the unilateral removal of the Applicants from their positions on the Corporation’s board, including, but not limited to, contracts related to: i. The purchase of 30 new trailers in October and November, 2023; ii. The leasing of 19 trailers in November and December, 2023; iii. The purchase of two tractors in August, 2023; iv. The hiring of additional drivers (including 50 owner-operators) since September 30, 2023; and v. The entering into of a new lease by the Corporation for its headquarters.

[43] The applicants’ evidence is that they were all involved in the management of WWC prior to their removal in August 2023 and that any material decisions related to WWC were always made collectively. The applicants state that they met with Sukhdev (i) every quarter with WW Group’s accountants to review the various companies’ financial statements and discuss how operations could be improved, and (ii) at year-end to review the complete financial statements with the accounting team.

[44] With regard to the applicants’ request for further documentary production regarding WWC’s operations and its financial condition, the applicants have already had access to operational documents. Sukhdev’s position is that they have no right to the requested “complete access to, and copies of, the Corporation’s financial information.” This is a level of disclosure that would exceed what they previously received when they were directors. Sukhdev’s evidence is that the applicants have already been given access to the “material contracts” they seek via the fleet management system.

[45] Sukhdev states that the applicants retain their access to the fleet management system and WWC’s banking information.

[46] Although the applicants are not currently directors (having been removed by Sukhdev), it is reasonable for them to request and receive the information that they would have received as directors under the OBCA. Accordingly, to the extent that there are documents or information that ought to have been provided to a director pursuant to the OBCA since August 2023, Sukhdev shall provide such documents and information to the applicants within the next 30 days. From now until the decision on the Application is rendered, to the extent that there are documents or information that would be provided to a director pursuant to the OBCA, Sukhdev shall provide such documents or information to the applicants forthwith.

[47] The Application is scheduled to be heard on a full record at the end of October 2024. Until that time, Sukhdev has been given the authority to manage WWC’s business, subject to the provisos in the October Order, including that he must carry on business in the ordinary course.

[48] The parties had agreed on costs if one party was successful. Because I made a declaratory finding regarding the breach by Sukhdev but declined to order most of the relief sought by the applicants, success was divided. Each party shall bear their own costs.

J. Steele J.

Released: July 31, 2024

COURT FILE NO.: CV-24-00713514-00CL and CV-23-00705174-0000 DATE: 20240731 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

PARAMJIT CHEEMA, also known as PARAMJEET CHEEMA, HARCHAND DHALIWAL and SWARNJIT JHAJJ Applicants – and – SUKHDEV DHALIWAL and WORLDWIDE CARRIERS LTD. Respondents

REASONS FOR JUDGMENT Steele J. Released: July 31, 2024