



COURT OF APPEAL FOR ONTARIO

CITATION: Sandhu v. Sikh Lehar International Organization,
    2018 ONCA 866

DATE: 20181026

DOCKET: C64478 & C64511

Hoy A.C.J.O., Sharpe and Fairburn JJ.A.

BETWEEN

Sukhinder Sandhu and
    2207190 Ontario Inc.

Plaintiffs (Respondents)

and

Sikh Lehar International Organization, Manjit
    Mangat and Harkhanwal Singh

Defendants (Appellants)

Ted R. Laan, for the appellant Sikh Lehar International
    Organization

Harinder Dhaliwal, for the appellants Manjit Mangat and
    Harkhanwal Singh

Paul J. Pape, for the respondents Sukhinder Sandhu and
    2207190 Ontario Inc.

Heard: October 19, 2018

On appeal from the
    judgment of Justice LeMay of the Ontario Superior Court of Justice, entered September
    25, 2017, with reasons reported at 2017 ONSC 5680.

REASONS FOR DECISION

[1]

This appeal arises from an attempt by the
    respondents, Sukhinder Sandhu and 2207190 Ontario Inc. (220), to purchase a
    property municipally known as 79 Bramsteele Road (the Property) owned by the
    appellant Sikh Lehar International Organization (SLIO).

[2]

The trial judge found that the sum of
    $1,735,000 that the respondents advanced to SLIO under an agreement dated April
    8, 2015 (the Control Agreement) was a loan, that the loan was subject to
    interest at the rate of 12% per annum, and that the individual appellants,
    Manjit Mangat and Harkhanwal Singh, were jointly and severally liable with SLIO
    to repay the loan.

[3]

The appellants argue that the trial judge erred
    by: (1) failing to conclude that the loan was repayable only if the respondents
    ultimately purchased the Property; (2) finding that interest was payable on the
    loan at a rate of 12% per annum, when the Control Agreement did not
    specifically provide for payment of interest; and (3) finding that Mangat and
    Singh are jointly and severally liable in their personal capacities, along with
    SLIO, for repaying the loan.

[4]

We reject these arguments.

[5]

As a preliminary matter, the trial judges
    findings were driven by his interpretation of the Control Agreement. Contractual
    interpretation involves issues of mixed fact and law, and the trial judges
    interpretation of the Control Agreement is reviewable only for palpable and
    overriding error:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50. While this court
    will review extricable questions of law that arise in the interpretive process
    on a standard of correctness, the appellants have not identified any such
    extricable question of law.

[6]

First, there is no basis to interfere with the
    trial judges conclusion that the funds advanced to SLIO were a loan and were
    required to be repaid even if the respondents did not ultimately acquire the
    Property. The trial judge properly interpreted the Control Agreement having
    regard to the surrounding factual matrix, and his interpretation of the
    agreement in this context was reasonable.

[7]

The Control Agreement is essentially a one-page
    document. It specifically describes the funds at issue as a loan. It does not
    state that the loan is a limited-recourse loan, repayable only if the
    respondents purchase the Property.

[8]

The factual matrix surrounding the Control
    Agreement was that SLIO was having difficulties meeting its bills, and its five
    trustees could not agree as to how, whether and to whom the Property should be
    sold. Mangat and Singh were two of SLIOs five trustees. They entered into an
    agreement to sell the Property to Sandhu. The remaining trustees entered into
    an agreement to sell the Property to another person, at a higher price, subject
    to the approval of SLIOs trustees.

[9]

The purpose of the Control Agreement was to
    enable Mangat and Singh to secure the departure of the other trustees so that
    the respondents could acquire the Property. The initial agreement of purchase
    and sale between Sandhu, Mangat and Singh in respect of the Property was
    replaced, and subsequently modified and extended, after the parties entered
    into the Control Agreement. Ultimately, the purchase and sale of the Property
    was not completed on the agreed upon closing date. The trial judge found that
    neither party was ready, willing or able to close the transaction and that, as
    a result, the respondents had the right to rescind the agreement of purchase
    and sale. That finding is not challenged on appeal.

[10]

The appellants argue on appeal that the loan was
    repayable only if the purchase and sale of the Property to the respondents was
    completed. In that eventuality, the purchase price would be partially satisfied
    by setting off the amount of the outstanding loan. However, as we have stated,
    the Control Agreement does not provide that the funds would only be repaid if
    the respondents acquired the Property.

[11]

Further, the appellants interpretation is not
    commercially reasonable. On their interpretation of the Control Agreement, notwithstanding
    that SLIO was not ready, willing or able to close the transaction and the fact
    that respondents were entitled to rescind the agreement of purchase and sale,
    SLIO is entitled to retain both the funds advanced under the Control Agreement
and
the Property. In other words, the
    appellants failure to do what was necessary to complete the transaction results
    in a windfall to them. This interpretation finds no support in the express
    terms of the Control Agreement and invites a commercially absurd result. We
    agree with the trial judges conclusion that the funds advanced under the
    Control Agreement were a loan that must now be repaid.

[12]

Second, the trial judges finding that the loan
    was subject to interest at the rate of 12% per annum is amply supported by the
    record. As the trial judge noted, a letter from counsel to SLIO, prepared under
    instructions, identifies this as the prevailing interest rate for the loan. Contrary
    to the appellants submissions, this letter is not inconsistent with Sandhus
    evidence at trial.

[13]

Finally, there is no basis to interfere with the
    trial judges finding that Mangat and Singh are jointly and severally liable
    with SLIO to repay the loan. The respondent 220, Mangat and Singh are the
    parties to the Control Agreement. At the time that the parties entered into the
    Control Agreement and the funds were advanced, all the parties knew that Mangat
    and Singh were not in a position to incur liabilities on behalf of SLIO.
    Further, Control Agreement does not state that Mangat and Singh are not liable
    in their personal capacities for the loan.

[14]

Accordingly, the appeal is dismissed. The appellants shall be
    jointly and severally liable for the respondents costs of the appeal, which
    are fixed in the amount of $15,000, inclusive of HST and disbursements.

Alexandra Hoy
    A.C.J.O.

Robert J. Sharpe J.A.

Fairburn J.A.


