Executive Summary: Key Legal and Evidentiary Issues

• Found that the respondents’ exclusion of the applicant from business affairs constituted oppressive conduct under the Business Corporations Act.

• Determined that the applicant was entitled to recover his capital investment and share of proceeds from a business sale.

• Considered and dismissed late-filed responding evidence due to non-compliance with prior court orders.

• Awarded punitive damages based on the respondents’ bad-faith and covert behavior.

• Rejected the respondents’ request for adjournment, emphasizing the prejudice caused to the applicant.

• Imposed substantial indemnity costs due to serious procedural misconduct and delay.

Facts of the case

Hoshang Bakhshi brought an application under section 248 of the Business Corporations Act, seeking relief from what he described as oppressive conduct by his former business partners in two Ontario companies. Bakhshi had invested approximately USD 124,000 in the operations of “Indian Street Food Co.” and “Eat Indian,” which were run through 2565090 Ontario Ltd. and 2563778 Ontario Ltd., respectively. The business was initially managed collaboratively, but in late 2023, Bakhshi was shut out of the day-to-day operations, and his access to bank records was revoked.

Justice Morgan had issued a timetable order for the matter in August 2024, requiring all parties to exchange evidence by September 2024 and to proceed with cross-examinations and hearings through early 2025. However, the respondents failed to comply with the court’s schedule. Most notably, they did not file any responding materials until just days before the scheduled hearing in April 2025. Meanwhile, Bakhshi filed a factum based on an effectively unopposed record, requesting recovery of his investment, share of sale proceeds, and additional damages.

The respondents ultimately submitted affidavits very late and failed to provide key financial documentation. They admitted that Bakhshi was no longer involved in the company and confirmed that the restaurant had been sold for CAD 100,000. Bakhshi argued he was entitled to one-third of the sale price based on his ownership stake.

Legal reasoning and court analysis

Justice Schabas considered whether to allow the matter to proceed in light of the late evidence. He noted that the respondents, despite being aware of the court-ordered timetable for months, failed to comply or request an adjournment in advance. Their last-minute filing, without justification, was procedurally unfair and would cause prejudice if relied upon. As such, the court chose to proceed based on Bakhshi’s materials alone, accepting only uncontested or corroborative parts of the respondents’ submissions.

The court found that the applicant had made out a clear case of oppression. He was excluded from management, denied access to financial information, and deprived of both his investment and his share of proceeds from the sale of the business. The court awarded restitution of the original investment (USD 124,062.34) and CAD 33,000 as Bakhshi’s one-third share of the CAD 100,000 sale price.

On punitive damages, the court found that the conduct of the respondents—particularly their deliberate exclusion of Bakhshi and failure to comply with procedural obligations—demonstrated bad faith and warranted condemnation. A punitive award of CAD 25,000 was imposed. The court also granted substantial indemnity costs in the amount of CAD 40,700.39, citing the respondents’ disregard for the court’s authority and the significant prejudice to Bakhshi.

Outcome

The court granted the application in full. Hoshang Bakhshi was awarded restitution of his investment, a share of the business sale proceeds, $25,000 in punitive damages, and $40,700.39 in substantial indemnity costs. The conduct of the respondents was declared oppressive and unfairly prejudicial under section 248 of the Business Corporations Act, and the case serves as a strong reminder of the consequences of procedural non-compliance and exclusionary business practices.