Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs claim beneficial ownership of five Teknocan shares held by Mirage under a January 5, 2017 Trust Agreement, seeking to collapse the trust and compel transfer.

• Mirage disputes the trust qualifies as a "bare trust" that can be collapsed, arguing voting provisions limit the plaintiffs' beneficial interest.

• The defendant sought to amend its pleadings to add "Interest Amendments" and "Clean Hands Amendments" close to trial, which plaintiffs opposed as prejudicial and abusive of process.

• Associate Judge Robinson granted leave for all proposed amendments, finding they were not bound to fail and did not constitute a collateral attack on prior consent orders.

• On appeal, Justice Milman partially reversed, striking the conspiracy-based clean hands defence for lacking the requisite "immediate and necessary relation" to the plaintiffs' claims.

• The clean hands defence based on alleged failure to confirm debt retirement was allowed to proceed as it was at least arguable that plaintiffs relied on their compliance with the agreement.

Background and parties involved

This litigation involves two related actions in British Columbia. In the first action, Pan Pacific Business Corporation sued Mirage Trading Corporation. In the second, Norseyl Properties Ltd. and AXA Consulting Services Inc. sued the same defendant. Mirage is the registered owner of 10 shares in Teknocan Properties Inc., representing a 10 percent interest in the company. MAJ Enterprises Inc. (formerly M.R.G. Investment Corporation) is the majority shareholder in Teknocan, holding a 90 percent interest. Teknocan in turn owns a 51.7% equity interest in two limited partnerships, Seylynn (North Shore) Development Limited Partnership and Seylynn (North Shore) Properties Phase II Limited Partnership, which are developing two real estate projects in North Vancouver.

The trust agreement and share dispute

In or around 2011, Mirage acquired its Teknocan shares through a loan facilitated by Mahmoud Rabiei Ghahroud (Mr. Rabiei Sr.) to the defendant or its principal, Dr. Abo Taheri. In 2016, Mr. Rabiei Sr. demanded that Dr. Taheri repay that loan. The plaintiffs agreed to collectively repay Mirage's debt to Mr. Rabiei and also pay to Mirage an additional sum of CAD$654,000 in exchange for a beneficial interest in 50 percent of Mirage's interest in Teknocan. This arrangement was formalized in a Trust Agreement dated January 5, 2017, which confirmed the defendant transferred a beneficial interest in five shares to the plaintiffs—Pan Pacific and Norseyl each acquiring a 2 percent beneficial interest, and AXA acquiring a 1 percent beneficial interest. The plaintiffs commenced their actions on May 29, 2023, seeking declarations of beneficial ownership, termination of the trust, and orders requiring Mirage to transfer the shares.

The oppression proceeding and related orders

Parallel to these actions, Mirage commenced an oppression proceeding (Vancouver Registry Action No. S244258) on June 21, 2024, alleging that MAJ and Mr. Rabiei Jr. had engaged in oppressive conduct against it. On July 22, 2024, an interlocutory injunction was granted prohibiting Teknocan from further disposing of its assets other than in the ordinary course of business, among other restrictions. When the Oppression Proceeding came on for hearing on the merits, the parties agreed on the terms of a consent order made by Underhill J. without a hearing on April 28, 2025 (the "Stay Order"). The Stay Order provided that if the court determined the plaintiffs were the beneficial owners of the disputed shares upon conclusion of the two actions, each plaintiff could elect within 15 days either to accept their pro rata share of the purchase funds or to retain their respective shares. Justice Underhill subsequently released his reserved decision on October 7, 2025, declaring that the affairs of Teknocan had been conducted in a manner oppressive or unfairly prejudicial to Mirage and directing MAJ to purchase the shares of Mirage in Teknocan, subject to the terms of the Stay Order.

The amendment applications

On August 11, 2025, Mirage applied to amend its responses to include "Interest Amendments," which elaborated on its position that the Trust Agreement did not create a bare trust due to constrained voting rights, and "Clean Hands Amendments." The Clean Hands Amendments alleged that the plaintiffs breached their contractual obligation to confirm that they had collectively repaid the defendant's debt to Mr. Rabiei, and that they conspired with others, including with Teknocan, to oppress the defendant and to wrongfully deny the defendant dividends commensurate with the defendant's interest in Teknocan. The plaintiffs opposed these amendments, arguing they constituted a collateral attack on the Stay Order and therefore an abuse of process.

Associate Judge Robinson's ruling

Associate Judge Robinson granted leave for all amendments on October 17, 2025. Regarding the Interest Amendments, he found they were not, in any meaningful sense, new, as the defendant had denied the existence of a bare trust and denied its status as a bare trustee from the outset. The proposed amendments explained the defendant's basis for that position and did not assert a new defence. He rejected the plaintiffs' contention that the Interest Amendments were inconsistent with previous pleadings or constituted the withdrawal of a prior admission. On the Clean Hands Amendments, he acknowledged that while the pleading of the defendant was "decidedly imperfect" and did not accord precisely with the requirements for pleading conspiracy, the court was not required to employ perfection as a standard. Unless it was plain and obvious the deficiency rendered the pleading bound to fail, the law required deference to allowing the amendment. He also rejected the argument that the amendments constituted a collateral attack on the Stay Order, finding that the obvious purpose of that order was to preserve the rights of the parties and allow for findings in the petition proceeding without prejudicing those rights.

The appeal decision

The plaintiffs appealed, arguing the associate judge erred in concluding the clean hands defence was not bound to fail and that it amounted to an abuse of process. Justice Milman, in his February 4, 2026 decision, found the associate judge made two inter-related errors in paragraph 61 of his reasons: he overstated the circumstances in which a clean hands defence can succeed by requiring only that misconduct be "material to the right at issue" rather than that the alleged misconduct form part of the basis for the claim, and he compounded that error by erroneously concluding that he need not address that question, finding it to be one more appropriately left for trial. The plaintiffs submitted this amounted to a misdirection because the associate judge had a duty as gatekeeper to assess whether the defence was bound to fail.

The outcome

Justice Milman allowed the appeals in part. He struck the paragraphs raising the clean hands defence based on the conspiracy allegation, finding that Mirage had not pleaded sufficient facts to connect that alleged misconduct to the foundation for the plaintiffs' claim. The conspiracy was alleged to have been formed and carried out in 2024, long after the events in 2016 and 2017 giving rise to the trust that the plaintiffs seek to enforce. However, he dismissed the appeal regarding the clean hands defence based on the alleged failure to confirm debt retirement, as it was "at least arguable" that the plaintiffs were, in advancing their claims, relying on their having complied with the agreement entitling them to a beneficial interest in the disputed shares. The collateral attack argument was rejected, with the court finding the Stay Order grants recourses to the plaintiffs only if, at the conclusion of these actions, the court finds them to be the beneficial owners of the disputed shares. As success was divided, the costs of the appeals were ordered to be payable in the cause. No specific monetary amounts were awarded in these procedural decisions, with the substantive trial yet to determine the ultimate outcome of the share ownership dispute.