Court File and Parties

Court File No.: CV-23-00710673-00ES
Date: 2025-02-04
Superior Court of Justice – Ontario

In the matter of the Sangha Property Trust and in the matter of the Dmyant Sangha Family Trust

Re: Kelly Diane Riedel, Applicant

And:
Dmyant (Bob) Sangha, personally and in his capacity as a Trustee of The Sangha Property Trust,
Sarbjit Basra in his capacity as a Trustee of The Sangha Property Trust,
Cesar Zumarraga in his capacity as settlor of The Sangha Property Trust,
The Office of the Children’s Lawyer on behalf of all minors, unascertained and unborn beneficiaries,
Barry Zehr in his capacity as settlor of The Dmyant Sangha Family Trust,
and Dmyant (Mr. Sangha) Sangha, Sarbjit Basra, Aly Alladina, and Sandeep Singh, in their capacities as Trustees of The Dmyant Sangha Family Trust, Respondents

Before: M.D. Faieta

Counsel:
Archie Rabinowitz and Holly V.A. Cunliffe, for the Applicant
Anne E. Posno and Heather Hansen, for the Respondent, Dmyant (Bob) Sangha in his personal capacity only
Megan Shortreed and Jean-Claude Killey, for the Respondents Dmyant (Bob) Sangha, in his capacity as a Trustee of The Sangha Property Trust, Sarbjit Basra in his capacity as a Trustee of The Sangha Property Trust, Cesar Zumarraga in his capacity as settlor of The Sangha Property Trust, and Dmyant (Bob) Sangha, Sarbjit Basra, Aly Alladina and Sandeep Singh in their capacities as Trustees of The Dmyant Sangha Family Trust (“the Respondent Trustees”)
Matthew G. Moloci and Jordan S.A. Moss, for the Respondent Barry Zehr in his capacity as settlor of The Dmyant Sangha Family Trust
Justin W. de Vries and Rebecca Studin, agents for The Children’s Lawyer

Heard: 2024-10-04

Endorsement

Background

[1] The applicant, Dr. Kelly Diane Riedel (“Dr. Riedel”) is an orthopedic surgeon. Her spouse, the respondent Dmyant Sangha (“Mr. Sangha”), is the CEO of Maxit Capital LP (“Maxit”).

[2] According to Dr. Riedel, she and Mr. Sangha commenced a romantic relationship in 2001 and began living together in 2003. They are the parents of three children. Their first child was born in 2007, and they married in 2008.

[3] In 2013, Mr. Sangha founded Maxit, an investment and merchant bank that offers financial advisory services focused on the mining sector.

[4] On December 17, 2013, The Dmyant Sangha Family Trust (“the Family Trust”) was settled by Barry Zehr. The trustees are Mr. Sangha, Sarb Basra, Aly Alladina and Sandeep Singh. The beneficiaries of the Family Trust are “spouse”, children/issue and wholly-owned corporations of the beneficiaries. It is a discretionary trust that is governed by a majority vote of the trustees.

[5] In about 2018, Mr. Sangha and Dr. Riedel decided to move to Florida.

[6] In 2019, Dr. Riedel, Mr. Sangha and their children moved from Toronto to Florida in 2019 and currently reside there.

[7] On April 9, 2019, The Sangha Property Trust (“the Property Trust”) was settled by Cesar Zumarraga. The trustees are Dr. Riedel, Mr. Sangha and Sarb Basra. The beneficiaries are Dr. Riedel, Mr. Sangha and any children/issue. It is also a discretionary trust that is governed by a majority vote of trustees.

[8] On May 13, 2019, the purchase of the Florida home closed.

[9] On September 6, 2023, Mr. Sangha filed a petition for divorce in Florida and in November 2023, Dr. Riedel filed a counterpetition for divorce in Florida. There is no dispute that the divorce proceedings are highly litigious and acrimonious.

[10] On December 1, 2023, Dr. Riedel commenced this Application for, amongst other things, disclosure of the Family Trust agreement.

[11] On January 16, 2024, a copy of the Family Trust agreement was provided to Dr. Riedel in the Florida matrimonial proceeding. In that proceeding, Mr. Sangha takes the position that Dr. Riedel is not entitled to an equalization payment from Maxit or the Family Trust.

[12] The Family Trust indirectly owns Maxit. Its interest in Maxit has an estimated pre-tax value of about USD $60-65 million. Each of the trustees, Sarbjit Basra, Ally Alladina and Sandeep Singh, have known Mr. Sangha for over 20 years. Sarbjit Basra is the managing partner at Davies Ward Phillips & Vineberg LLP and he is also counsel to Maxit. Ally Alladina is a Chartered Financial Analyst and was Mr. Sangha’s best man at his wedding. Sandeep Singh has worked most of his career as an investment banker, working directly with Mr. Sangha.

[13] An Amended Notice of Application was issued on March 11, 2024. Dr. Riedel claims that:

(a) The Sangha Family Trust was settled on December 17, 2013. Dr. Riedel was never advised of the existence of Family Trust until after this application was commenced. Dr. Riedel also alleges that she has never received any distributions from the Family Trust despite being Mr. Sangha’s spouse and designated as a beneficiary.

(b) Their home in Florida is an asset of the Sangha Property Trust that was settled on April 6, 2019, in Toronto under suspicious circumstances and is void on the basis of duress, fraud, unconscionability, undue influence, and/or non est factum. The Property Trust states that its effect and construction shall be governed by the laws of Ontario.

(c) The settlement of the Property Trust and the Family Trust were made with the intention to delay, hinder, or defraud the applicant and is void pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and such trusts are otherwise sham trusts settled with the intention of avoiding Mr. Sangha’s family law obligations to Dr. Riedel.

[14] In this Application, Dr. Riedel seeks, amongst other things:

(a) A declaration that the Property Trust be set aside or declared void ab initio, as it was settled at Mr. Sangha’s direction with the intent to avoid his family law obligations in the event of a breakdown of marriage or is otherwise void because Dr. Riedel’s signature as a purported trustee was obtained without her knowledge or approval. In the alternative, Dr. Riedel seeks an order removing the trustees of the Property Trust and replacing them with an independent, neutral trustee.

(b) A declaration that the Family Trust be declared void ab initio, as it was settled at Mr. Sangha’s direction with the intent to avoid his family law obligations in the event of a marriage breakdown. Further, Dr. Riedel seeks a declaration that there are no truly independent trustees of the Family Trust and that Mr. Sangha is the de facto sole and controlling mind of the Family Trust.

(c) An order for the production of all lawyer records, notes and files from any lawyer or law firm who may have provided legal information or advice to Dr. Riedel and/or to Mr. Sangha, and/or the settlor of the Property Trust and the Family Trust to such extent that such legal information or advice pertained to the drafting and settlement of the Family Trust, the Property Trust or to Dr. Riedel and Mr. Sangha’s Last Will and Testament.

[15] Dr. Riedel brings this motion for the following Order:

(a) An Order that this Application be converted to an action and for direction regarding how this matter is to proceed;

(b) An Order for the production of all lawyer records, notes and files from any lawyer or law firm in connection with the drafting and settlement of the Family Trust as well as the administration of the Family Trust for the period from December 17, 2013 to the date that the Trustees assert that Dr. Riedel is no longer a beneficiary in the same manner and to the same extent as the Trustees could compel production.

(c) An Order granting Dr. Riedel leave to examine any lawyer(s) in any jurisdiction who provided legal advice to Mr. Sangha and/or the Trustees, in respect to the settlement and administration of the Family Trust.

(d) If necessary, an Order waiving and/or setting aside any duty of confidentiality and/or solicitor-client privilege with respect to the foregoing productions and examinations.

[16] As a preliminary matter, at the request of the Respondent Trustees, and with no opposition from the other parties, a sealing order and an order expunging Exhibit “K” to the affidavit of Dr. Riedel sworn August 23, 2024 from the court file on the basis that the exhibit is protected by solicitor-client privilege that has not been waived. The test for court openness is outlined in Sherman Estate v. Donovan, 2021 SCC 25, at para. 38. Solicitor-client privilege is an important public interest to be protected and there are no reasonable alternative measures to protect that interest in this case. I find that the requested order minimally impacts the open court principle. Further, the benefits of the order outweigh its negative effects. The requested orders are granted.

Issue #1: Should This Application Be Converted to an Action?

[17] This Application is brought pursuant to Rule 14.05(3)(a)-(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 on the basis that the relief claimed is:

(a) the opinion, advice or direction of the court on a question affecting the rights of a person in respect of the administration of the estate of a deceased person or the execution of a trust;

(b) an order directing executors, administrators or trustees to do or abstain from doing any particular act in respect of an estate or trust for which they are responsible;

(c) the removal or replacement of one or more executors, administrators or trustees, or the fixing of their compensation;

(d) the determination of rights that depend on the interpretation of a deed, will, contract or other instrument, or on the interpretation of a statute, order in council, regulation or municipal by-law or resolution.

[18] Under Rule 38.10(1)(b) a motions judge may convert an application into an action before the hearing of the application: Metropolitan Toronto Condominium Corp. No. 965 v. Metropolitan Toronto Condominium Corp. No. 1031, 2014 ONSC 4458, at para. 8.

[19] In Gojkovich v. Buhbli Organics Inc., 2023 ONSC 2738, para. 70, Perell J. stated:

… Procedural fairness is the critical determinant of whether an application should be converted into a trial. If the application cannot fairly be determined by the summary process of affidavits and cross-examinations, then the application should proceed to trial and a hearing of witnesses. However, if the determination of the issues, including issues of credibility can properly be made on the application record, then the application should not be converted into an action with a trial. …

[20] Similarly, in Newcastle Recycling Ltd. v. Clarington (Municipality), para. 11, Juriansz J.A. stated:

It is beyond the proper role of an application judge to determine the credibility of a deponent to resolve material facts which are disputed and which may affect the result.

[21] In Dell v. The Corporation of the Town of Niagara on the Lake et al, 2023 ONSC 1610, para. 21, Perell J. stated:

In determining whether to convert an application into a trial of an issue, the court will consider such factors as: (a) whether there are material facts in dispute; (b) the presence of complex issues; (c) whether there is a need for the exchange of pleadings and discovery; and (d) the importance and the nature of the relief sought by application. The court should consider whether the affidavits and the transcript of the cross-examination is sufficient to decide any credibility issues or whether a trial is required. The court should consider whether if the proceeding had already been commenced as an action and the moving party had brought a motion for a summary judgment would the court be satisfied that there is no genuine issue requiring a trial in which case a trial would not necessary.

[22] In her Amended Application, Dr. Riedel asserts that the Family Trust and the Property Trust are sham agreements in that they were made with “… the intention to delay, hinder or defraud the Applicant and [are] void pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and such trusts are otherwise sham trusts settled with the intention of avoiding [Mr. Sangha’s] family law obligations to the Applicant.” The Amended Application further alleges that the Property trust was settled “… under suspicious circumstances, and the Applicant’s position is that is void on the basis of duress, fraud, unconscionability, undue influence, and/or non est factum, or such other grounds as may be disclosed prior to the hearing of this Application”.

[23] As noted, Dr. Riedel submits that both Trusts were made with the intention to delay, hinder, or defraud the applicant and are void pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and such trusts are otherwise sham trusts settled with the intention of avoiding Mr. Sangha’s family law obligations to Dr. Riedel.

[24] The general principles related to whether a trust is void for being a sham were described by the Ontario Court of Appeal in Duca Financial Services Credit Union Ltd. v. Bozzo, 2011 ONCA 455, para. 2:

To establish a valid trust, there must be three certainties: the certainty of intention, the certainty of subject matter and the certainty of objects. [Citations omitted.]

A purported trust may be held to be a "sham" and void where a trust instrument sets out the persons who are to benefit but does not represent the settler's true intent which is simply to create the appearance of a disposition of assets through the purported trust. The actual intent, in such cases, is to retain control of the assets purportedly held in trust. In such an instance, there is no true intention to create a trust and one of the three certainties is missing; hence, the purported trust is void.

[25] In McGoey (Re), 2019 ONSC 80, Penny J. further explained that deceit need not be established to find that a trust is a sham and that the assessment of whether a trust is a sham turns on the intentions of the settlor at the time the trust was made:

19 A sham is a transaction or instrument designed to give the appearance of creating legal rights or obligations that are different from what the party actually intended to create. In the context of a trust, a sham trust is usually created for a fraudulent, deceitful or illegal purpose, such as avoiding a creditor. However, deceit is not a necessary element of a sham trust. The trust need only be presented by the parties as being different from what they know it to be, Sangha v. Reliance Investment Group Ltd., 2011 BCSC 1324 (B.C. S.C.) at paras. 346-347.

20 Whether a trust is invalid as the result of a sham depends on the intention that existed at the time that the alleged trust was made. Where the settlor did not in fact intend to part with the beneficial interest in trust property, but executed documents to that apparent effect, the trust is a sham. Absent clear and cogent evidence of an intention to create a valid trust, a trust may be set aside as a sham, Sangha, supra at para. 350; Antle v. R., 2010 FCA 280 (F.C.A.) at para. 20.

21 Where a purported trust does not represent the settlor’s true intent (which is simply to create the appearance of a disposition of assets) there is no true intention to create a trust and one of the three certainties (certainty of intention) is missing. As a result, the purported trust is void, Duca Financial Services Credit Union Ltd. v. Bozzo, 2011 ONCA 455 (Ont. C.A.) at para. 2. [Emphasis added]

[26] Dr. Riedel alleges, amongst other things, that the Trusts are void on the basis that they are a sham as: (1) No one ever told Dr. Riedel about the existence of the Family Trust whereas Mr. Sangha alleges that he discussed with Dr. Riedel the plan to hold Maxit in the Family Trust; (2) Dr. Riedel states that their marriage was in trouble prior to settlement of the Family Trust whereas Mr. Sangha alleges that he was committed to making the marriage work until it became evident in 2022 that their differences were irreconcilable; (3) Mr. Sangha treated the Family Trust’s assets as his own as he authorized loans from Maxit on non-commercial terms and used Maxit assets to pay for his girlfriend; (4) Mr. Sangha engaged in “coercive control” particularly in relation to family finances for many years during their marriage. Mr. Sangha denies these allegations. Dr. Riedel submits that “coercive control” is relevant to demonstrating that Mr. Sangha never intended to give up control of the assets placed in the Family Trust. The phrase “coercive and controlling behaviour” is an element of the definition of “family violence” found in s. 16(3) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), as amended; V.K.G. v. I.G., 2023 ONSC 6329, at para. 117 and I have interpreted her submissions, as well as the parties’ submissions, as using the phrase “coercive control” as a shorthand for “coercive and controlling behaviour”.

[27] In addition, Dr. Riedel alleges that disputes her signature, as one of the original trustees, on the Property Trust as she denies knowingly signing it. For this reason, Dr. Riedel has pleaded duress, fraud, undue influence, unconscionability and non est factum.

[28] Dr. Riedel submits that the above disputed material facts go to the heart of whether the two trusts are valid. She further submits that the determination of whether the trusts are valid is extremely important to her given the value of the trusts. She seeks:

(a) An Order that affidavits delivered to date may be used as evidence in chief at trial, to be supplemented with viva voce evidence on matters not raised in the affidavits;

(b) An Order for documentary discovery, to the extent relevant documents have not already been produced;

(c) An Order for oral examinations for discovery, and cross-examination on affidavits delivered, the transcript from such examinations may be used in the same manner as a discovery transcript may be used at trial; and

(d) Converting this matter to an action to proceed as such, subject to the above;

(e) Leave to introduce expert evidence on the issue of coercive control. At this time (and without prejudice to any future expert needs that may be identified in the course of litigation), counsel for Dr. Riedel seek to retain an expert witness to assist the Court in understanding the dynamics of coercive control in a relationship, how same may affect the vulnerable party’s negotiating/bargaining power when discussing family finances, and the reactions that a victim of coercive control may exhibit.

[29] The Trustees submit that this Application should not be converted into an action for the following reasons:

(a) The disputed material facts identified by Dr. Riedel are not relevant for assessing whether the trusts are a sham.

(b) There is ample evidence in the record to show that these trusts are not shams.

(c) The issue of whether Dr. Riedel signed the Property Trust does not require a trial to resolve as she has not pointed to any prejudice arising from the existence of the Property Trust given that she is both a trustee and beneficiary.

(d) Converting this application to an action would unnecessarily lengthen this proceeding to the detriment of the beneficiaries.

[30] Mr. Sangha submits that the doctrines of unconscionability, duress and non est factum do not inform the determination of whether the trusts are valid. He also submits that the existence of coercive control is irrelevant to assessing whether a trust is a sham. Finally, he submits that as it is unnecessary for this court to consider or rule on the accusation of coercive control in the marriage to determine the validity of the Trusts it follows that no expert evidence on coercive control is necessary for the court to determine the validity of the Trusts.

[31] Mr. Sangha further submits that: (1) the record is complete and ready for cross-examinations and a hearing date for this court to determine the validity of the Trusts; (2) the exchange of pleadings, affidavits of documents, and further expert evidence will cause entirely unwarranted delays and costs. He submits that the court has the authority to direct hybrid hearings, as needed, including viva voce evidence on any issues. After cross-examinations on the application record, this court will be in a better position to determine whether any evidentiary inconsistency requires a hybrid trial with viva voce evidence.

[32] Mr. Sangha proposes that this application proceed with the following “threshold” questions:

(a) Question #1: Excluding unconscionability, non est factum, duress and coercive control, are the Trusts valid? If the Trusts are not valid, then the Application is granted without any need to consider unconscionability, non est factum, duress and coercive control.

(b) Question #2: Are the issues of unconscionability, non est factum, duress and coercive control relevant to the determination of the validity of the Trusts? If not relevant, then there is no need for this court to consider these issues. If relevant, and the Trusts are valid under Question #1, then the proceeding should be converted to a trial.

[33] It is my view that, in light of the principles described earlier, the interests of justice are best served by not converting this application to an action at this point but rather that the hybrid approach described above should be followed.

[34] Finally, I grant leave to introduce expert evidence on the issue of coercive control if question #2 in respect of coercive control is answered in the affirmative.

Issue #2: Should an Order Be Granted for the Production of All Lawyer Records, Notes and Files in Connection with the Drafting, Settlement and Administration of the Family Trust?

[35] Dr. Riedel seeks all legal records related to the drafting, settlement and administration of the Family Trust even though she is no longer a beneficiary of that trust as she is no longer a “spouse” within the meaning of the trust agreement.

[36] A lawyer’s records related to the advice obtained by a trustee with respect to the administration of a trust are not subject to solicitor-privilege. However, a beneficiary is not entitled to production of any documents related to a separate and distinct matter in which a beneficiary and a trustee are in an adversarial relationship: Whitell v. Whitell, 2020 ONSC 2310, paras. 19-20.

[37] This distinction was explained as follows by Bruce J. in Chang v. Lai Estate, 2014 BCSC 128, para. 20:

The underlying basis for exempting from solicitor-client privilege those documents that relate to advice sought in connection with the administration of the estate is the joint or common interest of the trustee and the beneficiary. It follows that where the beneficiary is in an adversarial relationship with the executrix, solicitor-client privilege remains in place to preserve the confidentiality of those communications.

[38] The Trustees submit as a former beneficiary, Dr. Riedel is not entitled to production of the trustee’s solicitor-client privileged communications.

[39] In Kwok v. Kwok, 2008 BCSC 52, Hinkson J. stated:

63 Shik Han Kwok removed the plaintiff, the defendant, and their daughter Danvee, as beneficiaries of KIT in July 2003.

64 In O'Rourke, Lord Parmoor stated at p. 620: ...I agree with the view expressed by Petersen J., that the rule as to the right of a cestui que trust to the production of trust documents for inspection does not apply when the question to be tried in the action is whether the plaintiff is a cestui que trust or not.

65 The same conclusion was reached in Merritt v. Imasco Enterprises Inc..

66 I conclude that although the plaintiff was once a cestui que trust of KIT, the fact that she was unilaterally removed as such by Shuk Han Kwok forces her into the position where she must prove her status as a present beneficiary in these proceedings. Unless and until she is able to establish that she is a beneficiary of KIT, she is not entitled to the production and inspection of the documents she seeks on the basis that she is a beneficiary of KIT. [Emphasis added]

[40] Dr. Riedel submits that she did not know about the existence of the Family Trust until 2022 at which time she was no longer a beneficiary and thus fairness would dictate that production of such privileged communications should be made. The cases referenced by Dr. Riedel do not establish any such precedent.

Decision

[41] Order to go as follows:

(a) The motion to convert this application to an action is dismissed.

(b) A hearing shall be held on the following threshold questions on this application:

(1) Question #1: Excluding unconscionability, non est factum, duress and coercive control, are the Trusts valid? If the Trusts are not valid, then the application is granted without any need to consider unconscionability, non est factum, duress and coercive control.

(2) Question #2: Are the issues of unconscionability, non est factum, duress and coercive control relevant to the determination of the validity of the Trusts? If not relevant, then there is no need for this court to consider these issues. If relevant, and the Trusts are valid under Question #1, then the proceeding should be converted to a trial.

(c) The motion for leave to file further expert evidence related to coercive control is granted only if Question #2, above, in respect of coercive control is answered in the affirmative.

(d) The motion for production of lawyer records and examination of lawyers related to the Family Trust is dismissed.

(e) A sealing order and an order expunging from the court file Exhibit “K” to the affidavit of Dr. Riedel sworn August 23, 2024.

(f) The parties are directed to make every effort to resolve the issue of costs of this motion failing which any party seeking their costs shall deliver their costs submissions within ten days and responding costs submissions shall be delivered within twenty days. Costs submissions shall be a maximum of three pages excluding an outline of costs and any offers to settle.

M.D. Faieta
Date: February 4, 2025