Executive Summary: Key Legal and Evidentiary Issues

• The court examined whether the conduct of Mr. Chaudhary and Ms. Asghar toward Mr. Goyal amounted to oppression and fraud under the Ontario Business Corporations Act.

• The validity of the sale of the property by Ms. Asghar, acting without Mr. Goyal’s consent, was central, including whether proper corporate approvals were obtained.

• The adequacy and completion of contractual obligations—specifically, whether the necessary agreements with Tim Hortons, Esso On the Run, and Esso were finalized—were disputed.

• The court considered if the sale to 2623559 Ontario Inc. was bona fide or a sham, including issues of fair market value and the presence of “badges of fraud.”

• Claims and counterclaims regarding damages from the registration of a Certificate of Pending Litigation and alleged breach of contract were addressed.

• The remedy focused on whether a buyout or windup of the corporation was appropriate, and the quantum of damages for oppression and fraud.

Factual background

Mr. Goyal and Mr. Chaudhary, both real estate brokers, entered into a venture to develop a gas station on a property in Thorndale, Ontario. In March 2015, Mr. Goyal acquired a 50% interest in 2425779 Ontario Inc. (“242”), the company owning the property, by paying $350,000 upfront and agreeing to pay an additional $150,000 upon satisfaction of certain development-related obligations. The other 50% was acquired by Ms. Asghar, Mr. Chaudhary’s wife, for $50. Mr. Goyal became president and a director of 242, with Ms. Asghar as the other director.

The relationship between Mr. Goyal and Mr. Chaudhary deteriorated quickly. Mr. Goyal felt excluded from updates and believed Mr. Chaudhary was not fulfilling his obligations. Attempts to resolve their differences, including offers to buy each other out, failed. In February 2018, Ms. Asghar, without Mr. Goyal’s knowledge or consent, signed an agreement to sell the property to 2623559 Ontario Inc. (“262”), owned by Mr. Bishay, a long-time client of Mr. Chaudhary.

The breakdown of the relationship and the sale

Mr. Goyal repeatedly sought information and updates on the project, especially regarding the required agreements with Tim Hortons, Esso On the Run, and Esso. Mr. Chaudhary was dismissive, and the parties could not agree on a buyout or sale terms. Eventually, Ms. Asghar, acting on instructions from Mr. Chaudhary, sold the property to 262 for $1,510,000, without proper corporate authorization or Mr. Goyal’s involvement. The sale was conducted hastily, with no due diligence and for a price below a contemporaneous arm’s-length offer from another party (HLH Investments Ltd.).

Litigation and return of the property

Mr. Goyal commenced litigation, obtained a Certificate of Pending Litigation (CPL), and the sale proceeds were paid into court. 262 eventually consented to rescind the sale, and the property was returned to 242 in 2021. Despite this, the relationship between Mr. Goyal and Mr. Chaudhary remained acrimonious, and efforts to sell the property stalled due to ongoing disputes.

Policy terms and contractual clauses at issue

The agreements between the parties required that before Mr. Goyal paid the remaining $150,000 for his shares, certain conditions had to be met: registration of a satisfactory site plan, completion of lease documentation with Tim Hortons, sublease with Esso On the Run, and a fuel supply agreement with Esso. The court found that these conditions were not satisfied, as the agreements were either unsigned, incomplete, or non-existent at the relevant times.

Findings on oppression and fraud

The court found that Mr. Chaudhary and Ms. Asghar’s conduct was oppressive and unfairly prejudicial to Mr. Goyal, violating his reasonable expectations as a director and shareholder. The sale was conducted in secret, without proper approvals, and at a price below market value, constituting a sham transaction and fraud. The court found several “badges of fraud,” including the secretive nature of the sale, haste, false documentation, and inadequate consideration.

Outcome and remedies

The court granted a declaration of oppression against Mr. Chaudhary and Ms. Asghar and ordered a “shotgun” buy-sell process based on an independent appraisal of the property. Mr. Goyal was given the right to elect whether to buy out Ms. Asghar’s interest or sell his own at 50% of the appraised value. Additionally, the court awarded Mr. Goyal $200,000 in damages at large for oppression and fraud, on a joint and several basis against Mr. Chaudhary and Ms. Asghar. No punitive damages were awarded, as the court found that Mr. Goyal also acted improperly by not disclosing his own negotiations with a prospective purchaser. The court dismissed all counterclaims and claims for damages related to the CPL, as well as claims against Mr. Bishay and 262 for fraud.

In summary, Mr. Goyal was successful in establishing oppression and fraud, resulting in a significant monetary award and a court-supervised process to resolve the ownership deadlock. The exact amount to be paid for the buyout will depend on the independent appraisal, but the $200,000 damages award is fixed in favor of Mr. Goyal. Costs were left for the parties to resolve or, failing agreement, for further submissions to the court.