Rana v. Nagra

2012 BCCA 255 Rana v. Nagra COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Rana v. Nagra, 2012 BCCA 255 Date: 20120614 Docket: CA038136 Between: Joga Singh Rana, Karamjit Singh Rana and Kashmir Kaur Rana Appellants (Plaintiffs) And Harjinder Pal Singh Nagra, Paramjit Kaur Nagra and 567055 B.C. Inc. Respondents (Defendants) Before: The Honourable Chief Justice Finch The Honourable Madam Justice Rowles The Honourable Mr. Justice Tysoe Supplementary Reasons to: Court of Appeal for British Columbia, October 5, 2011 (Rana v. Nagra, 2011 BCCA 392) Counsel for the Appellants: D. J. Taylor and S. K. Sheena-Nakai Counsel for the Respondents on written submissions: S. A. Turner Place and Date of Hearing: Vancouver, British Columbia September 7, 2011 Place and Date of Judgment: Vancouver, British Columbia October 5, 2011 Written Submissions Received: March 16, May 7 and May 14, 2012 Date of Supplementary Judgment: June 14, 2012 Supplementary Reasons by: The Honourable Mr. Justice Tysoe Concurred in by: The Honourable Chief Justice Finch The Honourable Madam Justice Rowles Supplementary Reasons for Judgment of the Honourable Mr. Justice Tysoe: [1] In reasons for judgment dated October 5, 2011 and indexed as 2011 BCCA 392, we dismissed the appeal in this matter but made additional orders under s. 9(1)(c) of the Court of Appeal Act, R.S.B.C. 1996, c. 77. We ordered that shares transferred and monies paid under a share purchase agreement found to be unenforceable be re-transferred and repaid. The respondents now apply to have the Court reconsider these additional orders. The respondents' motion was accompanied by a memorandum of argument containing submissions with respect to the merits of the additional orders, and the appellants have filed responsive submissions. [2] The respondents say that the additional orders, which were made without the benefit of submissions, were inappropriate because some of the shares in question have been transferred to third parties, two of the companies have been or are in the process of being dissolved, the financing arrangements of one of the companies could be jeopardized and it would be impossible for the parties to work together as fellow shareholders. The respondents ask that the additional orders be vacated or, in the alternative, that the matter be remitted to the trial court. [3] The two families, the Ranas and the Nagras, were shareholders in five companies, 567055 B.C. Inc. ("567055"), B.C. Box Company Inc. ("B.C. Box"), ABC Packaging Inc., 565841 B.C. Inc. and ASAP Bindery Service Ltd. [4] There was evidence at trial that on or about July 31, 2003, before the execution of the share purchase agreement in question, the shares of Mr. Rana in 567055 were transferred to Mr. Sukhdev Sandhu. Mr. Rana testified that he never signed a document transferring his shares in 567055 to Mr. Sandhu and that he did not learn that his shares were transferred without his consent until November 2003 when he reviewed the corporate records of the company at the office of the lawyer who acted for the company. The trial judge found that Mr. Rana "wanted out" of 567055 and had "relinquished" his shares in the company in July 2003. [5] Differences had arisen between the parties and, with the assistance of a mutual friend, Pavittar Singh Sumbal, the parties reached an agreement by which the Nagras would purchase the shares of the Ranas in the five companies. A share purchase agreement was prepared by the Ranas' lawyer, and it was executed by the parties on November 27, 2003. [6] The share purchase agreement provided that the Ranas would transfer to the Nagras all of their interest in the five companies, including 567055. The purchase price was expressed to be the sum of $292,000 but clause 6.3 of the agreement provided that either party could claim "adjustments" to the price. The clause did not specify the nature of adjustments that could be claimed, and this aspect became central to the decision of the trial judge and this Court. [7] The sum of $20,000 was paid by the Nagras to the Ranas at the time of the execution of the agreement, and the balance was secured by a mortgage against the Nagras' home. The shares held by the Ranas in the companies were transferred to the Nagras pursuant to the agreement. An additional $50,000 was paid by the Nagras to the Ranas in January 2004, but no further payments were made. The trial judge found Mr. Nagra attempted to meet with Mr. Rana to determine the adjustments under clause 6.3 but Mr. Rana refused to agree to amounts that Mr. Nagra claimed were outstanding to him. [8] The Ranas commenced the underlying action to recover the balance of the purchase price payable under the share purchase agreement and to claim remedies in respect of the real property owned by 567055. [9] In their statement of defence, the Nagras admitted that the share purchase agreement had been entered into but denied that any monies were owing under the agreement. During the closing submissions at trial, counsel for the Nagras argued that the share purchase agreement was unenforceable. Counsel for the Ranas did not object to the issue being raised and made submissions on the merits of this issue. [10] In her reasons for judgment (indexed as 2010 BCSC 535), the trial judge held that the agreement was unenforceable because clause 6.3 made the purchase price uncertain. She also rejected Mr. Rana's claims against the real property owned by 567055. As a result, she dismissed the action and directed that the mortgage against the Nagras' residence be discharged. She did not make any directions with respect to the shares transferred or monies paid pursuant to the agreement. [11] The Ranas appealed the decisions of the trial judge. This Court did not accept any of the Ranas' arguments, and the appeal was dismissed. I said the following in the concluding paragraph of the reasons: [44] The judge found the share purchase agreement to be unenforceable. The consequence of this finding is that all things done pursuant to the unenforceable agreement should be reversed. The judge did this, in part, when she ordered the discharge of the mortgage against the Nagras' home. In my opinion, it would have been appropriate for the judge to have also ordered that the shares transferred pursuant to the agreement be transferred back to the Ranas and that the $70,000 paid under the agreement be returned to the Nagras in order to place the parties back in their respective positions prior to the execution of the agreement. I would make those additional orders. As Mr. Sandhu was not a party to either the share purchase agreement or this litigation, these orders do not affect whatever interest he may have in the shares in the capital of 567055 B.C. [Inc.] [12] When our reasons for judgment were released, we were not aware that there had been further dealings with the shares in the five companies other than the shares in the capital of 567055. We were aware that the shares of Mr. Rana in 567055 had purportedly been transferred to Mr. Sandhu prior to the execution of the share purchase agreement, and it was made clear that his interest in the shares, if any, was not affected by the additional orders. [13] We have now been provided with an affidavit of Mr. Nagra in which he deposes the following facts: (a) ASAP Bindery Service Ltd. has been dissolved and 565841 B.C. Inc. is in the process of being dissolved; (b) the current shareholders of ABC Packaging Inc. are Mr. and Mrs. Nagra; (c) the 100 shares in the capital of B.C. Box registered in the name of Mr. Rana were transferred to Mr. Nagra pursuant to the share purchase agreement and, in August 2011, Mr. Nagra sold 50 of those shares to the wife of Mr. Sumbal for $100,000, which was invested in the company for the purpose of purchasing new equipment; (d) 100 shares in 567055 had been registered in the name of Mr. Rana but 50 of the shares were transferred to Mr. Sandhu on July 31, 2003 in consideration of Mr. Sandhu's agreement to invest $250,000 in 567055, and the other 50 shares were transferred to Mr. Nagra; (e) Mr. Sandhu transferred his 50 shares in 567055 to Mrs. Nagra in January 2004, at which time Mr. Nagra and Mrs. Nagra each held 100 shares in 567055; (f) Mrs. Nagra sold 50 of her shares in 567055 to Mr. Sumbal in August 2011 for $400,000; (g) the loan agreement between 567055 and the credit union which provided it with financing contains a covenant on behalf of 567055 that its shareholdings will not be altered without the credit union's consent; and (h) Mr. Nagra and Mr. Rana no longer speak to each other and it would be impossible for them to work together as fellow shareholders. One of the documents attached to the affidavit of Mr. Nagra is 567055's register of members. It shows that Mr. Rana ceased to be a member on July 31, 2003 and that his 100 shares were transferred to Mr. Sandhu and Mr. Nagra on July 31, 2003. It does not show any of Mr. Rana's shares being transferred on or after the November 27, 2003 date of the share purchase agreement between the Ranas and the Nagras. [14] Mr. Rana has sworn a responding affidavit, in which he takes issue with some of the statements contained in Mr. Nagra's affidavit and points out that at least one of the statements in Mr. Nagra's affidavit is inconsistent with his testimony at the trial. He also asserts there seems to be a disparity between the register of members of 567055 attached to Mr. Nagra's affidavit and the copy of 567055's register of members entered as an exhibit at the trial. [15] As is reflected in para. 44 of the October 5, 2011 reasons for judgment, it would not be appropriate for this Court to make an order that affects the rights of third persons who are not parties to this litigation. We were aware that Mr. Rana's shares in 567055 were purportedly transferred to Mr. Sandhu in July 2003, prior to the execution of the share purchase agreement, and we stated that our additional orders did not affect whatever interest he may have in the shares. If Mr. Rana's shares were validly transferred in July 2003 (prior to the share purchase agreement), then they could not have been transferred pursuant to the agreement, and our additional orders would not have required them to be transferred back to Mr. Rana. [16] When we made our additional orders, we did not appreciate that the Nagras had transferred some of their shares to other parties subsequent to the share purchase agreement. If we had appreciated this fact, I have no doubt that we would not have made the orders, at least to the extent that they would have affected the rights of these other parties. As a result, it is my view that it is appropriate for us to reconsider these orders. The issue, then, is what order, if any, should be made. [17] While the Nagras concede that, if possible, the Court can restore the parties to their respective positions prior to the entering into of the share purchase agreement or can order compensation to prevent unjust enrichment (see, for example, Deglman v. Guaranty Trust Co. of Canada, [1954] S.C.R. 725, [1954] 3 D.L.R. 785), they say that no further orders should be made. They submit that, based on the uncontradicted findings of the trial judge, it would not be unjust for the Nagras to retain the shares transferred by the Ranas for the compensation of $70,000 that has been paid to the Ranas. [18] The Nagras base this position on the following two excerpts from the reasons of the trial judge: [40] ... After hearing all of the evidence, I am not satisfied that there is more due to the plaintiffs than that which they have already been paid. Were there evidence (which I could accept) to suggest that the plaintiffs would benefit from an accounting, it may be worthwhile to order an accounting. However, from the evidence, in my view it is unlikely that the plaintiffs will recover more following an accounting. The plaintiffs have the burden of satisfying me that an accounting is appropriate. They have not done so. * * * [50] As I have indicated, the finances of these parties are a mare's nest. I am not satisfied that these amounts are outstanding and are not satisfied in some other manner in one or more of the other dealings between these parties. [19] In my view, neither of these excerpts supports the conclusion that the shares transferred by the Ranas pursuant to the share purchase agreement were not worth more than the $70,000 amount paid by the Nagras or that no more than the $70,000 was due to them. The first excerpt was contained in the portion of the reasons dealing with Mr. Rana's request for an accounting of the real property previously owned by 567055 and referred back to the judge's comment at para. 39 that she was not satisfied that more than $70,000 was owed to Mr. Rana for his shares in 567055. I do not read the judge's comment to be a conclusion that the Ranas were not due more than $70,000 for their shares in all five companies. [20] The second excerpt was contained in the portion of the reasons dealing with the Nagras' counterclaim in relation to two promissory notes predating the share purchase agreement. The judge dismissed the counterclaim on the basis that the defendants did not meet the burden on them. Her comment on the counterclaim was unrelated to the value of the transferred shares or the amount that may be due to the Nagras for their shares. [21] As a result, I do not agree with the Nagras that the additional orders should simply be vacated with no further remedy. There is no principled basis why the Nagras should be permitted to retain the shares for the $70,000 they have paid. It must be remembered that the Nagras agreed in the share purchase agreement to pay $292,000, albeit subject to adjustments that were uncertain. As the nature of the adjustments was uncertain, it cannot be concluded that they would have amounted to $222,000. [22] Hence, it remains to be determined whether the parties can and should be restored to their positions prior to entering into the share purchase agreement and, if not, whether compensation should be paid to the Ranas. In my opinion, it cannot be determined whether restitution is possible or appropriate unless the transferees of the shares are joined to the proceedings and findings are made with respect to their purchases of the shares. This is more properly done in the Supreme Court than in this Court, as is a determination of the appropriate compensation in the event the parties are not restored to their previous positions. [23] I would set aside the additional orders articulated in para. 44 of the October 5 reasons for judgment and replace them with a direction that the issues of restitution and compensation be remitted to the Supreme Court for determination by such judge and in such manner as the Supreme Court considers appropriate. "The Honourable Mr. Justice Tysoe" I agree: "The Honourable Chief Justice Finch" I agree: "The Honourable Madam Justice Rowles"