Jajj v. 100337 Canada Ltd.

This matter involved two motions. A motion in a lawsuit is a procedural step where the parties involved may be seeking interim directions or Orders from the Court. A lawsuit in Ontario is commenced at the Ontario Superior Court of Justice by way of statement of claim (an action) or by way of notice of application (an application). There may be many procedural steps along the way in a lawsuit before the parties arrive at mediation and long before a trial or a hearing.

The first motion in this matter was by the Applicant, Balwant Singh Jajj, who sought an order for interim costs with respect to his application for oppression remedy against the respondents as a result of the operation of a business. The second motion was brought by the Respondents, seeking among other relief, a Mareva Order against the applicant and an interim and interlocutory order restraining competition.

This matter involved a complex dispute with respect to a family business operated by several members of the same family and related corporations operating a business at several real estate properties.

Over several decades starting in the 1980s the family acquired various real estate assets in Toronto and operated a operated a supermarket from one of these properties.

It was alleged that the Applicant in this matter (who was one of the children of the respondents), implemented an estate plan and reorganization some time in the 1990s involving some of the properties and the business for tax planning purposes and that the parents had not obtained independent legal advice. The parents could only speak and read Punjabi. The parents learned about the reorganization in 2012 and there a breakdown in the relationship with their son.

A messy family dispute ensued involving the parents and the other siblings which resulted in the Applicant eventually being removed as a director of two corporations in 2012. This led to Balwant also bringing an application for an oppression remedy against the Respondents with respect to his removal.

Several allegations were made against the Applicant including improper transfers of funds from bank accounts and transfers of funds to India. The Applicant was subsequently alleged to have started competing against the family’s business.

At this motion, the applicant also sought an order for interim costs with respect to his application for oppression.

Ken was successful in arguing that no relief should be awarded against his clients who were the children of Balwant. The Honourable Justice Spence concluded as follows at paragraphs 122 and 123 of the decision:

“122 On the analysis set out above, the three directors who supported the removal of Balwant as a director had a good prima facie reason to remove Balwant as a director, since his actions could not be regarded as in the best interests of the companies and their shareholders.

123 The removal did not comply with the by-law requirements, but it was at least prima facie in the best interests of the companies and their shareholders. Since that is the case, there is no apparent basis for considering the removal to have been an oppressive act by the other directors.”

While the Mareva order was issued against Balwant who was not Ken’s client, Ken was successful in resisting injunctive relief against his clients who were the children of Balwant:

“143 Accordingly, there is a risk of irreparable harm to the Udham Parties if a Mareva injunction is not ordered. The injunction will preserve those assets for the successful party. Since that is so and in view of the prima facie case against Balwant, the balance of convenience does not favour Balwant.

144 In determining the terms and scope of a Mareva injunction, the Ontario Court of Appeal has given the following direction in Chitel v. Rothbart (1982), 39 O.R. (2d) 513 (Ont. C.A.) at p. 21:

… The applicant must persuade the court by his material that the defendant is removing or there is a real risk that he is about to remove his assets from the jurisdiction to avoid the possibility of a judgment, or that the defendant is otherwise dissipating or disposing of his assets, in a manner clearly distinct from his usual or ordinary course of business or living, so as to render the possibility of future tracing of the assets remote, if not impossible in fact or in law.

145 On the materials before the Court, there is a material risk is that Balwant may deal with family assets by using the ICICI Bank or other intermediaries in India to shield assets from the possibility of tracing and access through the jurisdiction of the Court.”

With respect to the interim and interlocutory order restraining competition, Justice Spence ruled that at the time the Applicant was removed as director from the two corporations in 2012 he no longer had any fiduciary duties to the business:

“147 … On these facts, Balwant ceased on April 15, 2012 to hold or execute any position or responsibilities that could have given him fiduciary duties to the company. If he started up a competing business in November 2012, he was not restricted by any fiduciary duty from doing so. So there is no serious question to be tried.”

An injunction to stop a business from competing is typically a very difficult remedy to obtain. Ken was successful in resisting the request for an injunction against his clients.

If a party is able to resist having to pay costs during litigation as a result of an interim costs order, the opposing party that sought the interim costs order and failed to obtain it will not have as much funds to litigate and this may shorten the litigation as the parties may move closer to settlement.

Finally, the Honourable Justice Spence made the following orders in favour of the respondents:

“156 For the reasons set forth above, orders are to go as follows:

(1) An order that the motion that Balwant Jajj be granted interim costs is dismissed;

(2) An interim and interlocutory order granting to Udham Singh Jajj, Gurmit Kaur Jajj, Jajj Investment Holdings Ltd. and 100337 Canada Limited a Mareva injunction prohibiting Balwant from selling, transferring or otherwise dealing with assets in his name, which injunction shall be modelled on and contain the terms and provisions set out in the model Mareva Order approved for use in Commercial List matters with such changes as may be approved in writing by counsel for parties or by the Court.”

This matter was an example of a family / business dispute escalating into a prolonged legal battle. This particular motion dealt with an important step in the dispute and Ken was successful in stopping relief from being granted against his clients.

The full decision is available for review here.

Full citation: Jajj v. 100337 Canada Ltd., 2014 CarswellOnt 1216, 2014 ONSC 557, 237 A.C.W.S. (3d) 596