Dave v Sodhi, 2024 ABKB 18

Court of King’s Bench of Alberta Citation: Dave v Sodhi, 2024 ABKB 18 Date: 20240110 Docket: 1303 04234 Registry: Edmonton Between: Sanatkumar Dave Plaintiff - and - Amrik Sodhi, Ravita Sodhi and 1420477 Alberta Ltd. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Justice N.J. Whitling _______________________________________________________ I. Introduction and Overview [ 1 ] This case addresses a dispute amongst a number of family friends who agreed to enter into a business partnership for the purpose of running a gas station business in Barrhead.

The events at issue occurred in 2011 and 2012. This action has proceeded through a week-long trial, and the knowledgeable witnesses have testified and been cross-examined. The amount of damages claimed by the Plaintiff is $28,109.08 plus pre-judgment interest.

[ 2 ] The parties to this dispute did not retain lawyers or document the agreements between and amongst one another, and instead relied upon verbal understandings and mutual trust. [ 3 ] The business operation lasted only a few months. After it concluded, disputes arose as to the amounts owing by and to the various parties involved.

Again, little or no documentation was prepared. [ 4 ] It now falls to this court to determine the parties’ respective rights and responsibilities based upon faded memories and scant documentary evidence. [ 5 ] For the reasons which follow, I award judgment to the Plaintiff against the Defendants Ravita Sodhi and 1420477 Alberta Ltd. in the amount of $28,109.08 plus pre-judgment interest. II. Facts [ 6 ] The Plaintiff is Mr. Sanatkumar Dave.

It is agreed that he invested $40,000 of his own money in the business, and that it was agreed that he was to be a 50% partner. [ 7 ] This action was commenced by the Plaintiff against the Defendants Amrik Sodhi (“Amrik”), Ravita Sodhi (“Ravita”), and their numbered company 1420477 Alberta Ltd. (“142”). Amrik and Ravita are married and 142 is their company. [ 8 ] Since the commencement of this litigation, Amrik has declared bankruptcy and the action against him was stayed as a result. 142 has since dissolved, and it is essentially judgment proof.

As a result of these circumstances, neither Amrik nor 142 have defended this claim through counsel. [ 9 ] Ravita is Amrik’s spouse. She was a 50% shareholder and a Director of 142. She has defended against the present claim.

She claims that she is not personally liable for the debts of her husband or her company. [ 10 ] In late 2011, the Plaintiff entered into a verbal partnership agreement with Amrik to run the FasGas station in Barrhead, Alberta as equal business partners. [ 11 ] All of the witnesses in this trial used the term partnership to describe the relationship between the Plaintiff and Amrik, and I find that label to be a legally appropriate description as well.

Essentially, they agreed that they would contribute equally to the investment required to get the business started, and they agreed to split the profits equally. [ 12 ] At the time that the Plaintiff and Amrik decided to enter into their partnership agreement, they were on friendly terms.

They decided to trust one another and to proceed on the basis of verbal agreements. [ 13 ] Although the basic 50-50 partnership agreement was relatively straightforward in and of itself, things became more complicated when the Plaintiff and Amrik decided to introduce 142 into the equation. [ 14 ] 142 was a company owned by Amrik and Ravita. They were and are Directors and 50-50 shareholders in that company.

They had previously used that company to operate another FasGas station in Edmonton. [ 15 ] The Barrhead FasGas business operated as a franchise with a company called Parkland Industries Inc. as the franchisor. The business was carried out pursuant to an Operator Agreement dated November 2, 2011, naming 142 as the Operator and Parkland as the owner of the premises. [ 16 ] Exhibit 15 in this trial is an unsigned copy of the Operating Agreement between 142 and Parkland. [ 17 ] The witnesses all agree that Parkland was in a hurry to get the parties installed as the new operators of the gas station.

Given time constraints, the parties agreed that they would commence their new business by operating through 142. [ 18 ] To further complicate matters, all the witnesses agreed that the plan was to later transfer the business operation to a company owned and evenly controlled by the Plaintiff’s son Khush Dave and Ravita. The basic idea was that the Plaintiff and Amrik were setting up this business for the future benefit of their family members. [ 19 ] There were verbal discussions respecting these arrangements.

In particular, there was a discussion respecting the agreement to allow the business to be conducted by 142, at least at the outset. The persons involved in these discussions at least included the Plaintiff, Amrik and Ravita. [ 20 ] Ravita’s evidence as to her involvement in these discussions was less than clear.

She was asked about her involvement in the decision to start out operating the business through 142, in response she essentially stated: “No I didn’t say anything, I said OK.” I understand and interpret this evidence to mean that Ravita agreed to the arrangements that were proposed to her by her husband and the Plaintiff regarding the business and 142’s involvement in the business. [ 21 ] Again, the agreement to operate the business through 142 was not reduced to writing. Instead, the Plaintiff simply trusted his friends.

As he stated in cross examination, “I trusted them.” [ 22 ] Pursuant to these verbal arrangements, the Plaintiff made two payments of $20,000 each, or $40,000 total, to 142. Amrik contributed a similar amount, although at one point he claimed to have contributed $50,000 rather than $40,000. In any event, all were in agreement that the partnership was to be conducted on a 50-50 basis. [ 23 ] In order to get things up and running, it was necessary for credit applications to be prepared and submitted to a company

called Core-Mark and to Imperial Tobacco for periodic inventory purchases. The Plaintiff filled out these applications. The Core Mark application named Khush Dave and Ravita as the applicants, and 142’s bank account as the operating account. The Imperial Tobacco application named 142 as the applicant and Ravita as the contact. Neither of the copies of the applications that were marked as exhibits in this trial have been signed, so it is unclear what became of them. The Plaintiff believes that the Sodhis asked him to fill them out and that Ravita faxed them in.

Khush Dave had some recollection that he may have signed some credit applications. [ 24 ] The FasGas began operation in approximately November of 2011. Its day-to-day operations were carried out by Amrik and Khush. They rented and shared an apartment in Barrhead and bought some furniture for that apartment. [ 25 ] The Plaintiff visited the FasGas in Barrhead perhaps a few times and may have delivered supplies such as cigarettes or grocery items but was not involved in the day-to-day business.

He did receive periodic informal reports from Khush as to how things were going generally. [ 26 ] Similarly, Ravita may have visited the FasGas once or twice, such as when it first opened and when it finally shut down but she did not participate in the day-to-day running of the business. She was working her own jobs in Edmonton at the time. [ 27 ] While in operation, Khush did have access to the day-to-day records prepared by the business, including daily summaries indicating sales and expenses.

However, since 142 was the formal Operator of the business, the revenues and expenses were flowing through 142’s bank account at TD Canada Trust, and Khush did not have access to or control over that account since he was not an officer of 142. [ 28 ] On January 11, 2012, an email was sent on behalf of Amrik and Ravita to Parkland’s Territory Manager, John-Paul Postetio, asking that checks from Parkland be issued payable to Amrik and Ravita rather than Khush c/o FasGas since the TD bank account was in their own names and not Khush’s name. [ 29 ] Both Amrik and Ravita effectively denied sending the January 11, 2012, email that was sent on their behalf, but whoever drafted it and hit send, its net effect was that the Sodhis directed Parkland to pay moneys owing to the business to a bank account under their exclusive control. [ 30 ] Meanwhile, no later than January, 2012, Amrik began to use 142’s bank account to finance his own personal gambling habit. 142’s bank statements indicate perhaps 15 cash withdrawals of $2 to 3 thousand dollars at a time to “CASINO EDMONTON”.

Amrik also acknowledged in his testimony that some other ATM withdrawals that are not specifically identified as having occurred at the Casino were also used for gambling. [ 31 ] Amrik testified that he was attempting to hide his gambling habit from Ravita, and of course, he did not advise the Plaintiff that he was using the business’s moneys for gambling. [ 32 ] The business did not operate for long.

By December, 2011, it was apparent that the operation was not achieving the profits that Parkland had induced the parties to expect, and so they decided to terminate the Operator Agreement. [ 33 ] To that end, on December 24, 2011, the Plaintiff drafted and Ravita signed a letter or email to Mr. Postetio at Parkland, indicating an intention to terminate the agreement in 60 days, absent some further compensation or consideration being extended by Parkland. [ 34 ] Ravita signed the December 24, 2011, letter on behalf of 142. [ 35 ] The business ceased operation in late February 2012.

It appears that the final inventory was conducted on February 22, 2022, and the operation was returned to Parkland. [ 36 ] At the end of the day on February 22, 2022, the balance in 142’s bank account stood at 35,663.02. [ 37 ] The next day, February 23, 2012, $30,000 was transferred out of 142’s account to a joint bank account of Amrik and Ravita. [ 38 ] From that date until the end of April, 2012, being the last date for which we have bank statements, Amrik continued to use 142’s bank account to finance his gambling habits.

It may be noted that there were also a number of cash deposits during this period, and so the Casino withdrawals do not necessarily represent net losses to 142. [ 39 ] There were various other checks and payments out of the account after the closure of the business on February 22, 2012. Copies of many of these checks are in evidence. They reflect payments to suppliers like Frito Lay and Van Houtte’s coffee as well as checks written to individuals who were employed by the company. [ 40 ] On April 19, 2012, a payment into 142’s account was made by Parkland in the amount of $30,642.33.

Following several Casino transactions by Amrik, the balance in 142’s account at the end of April, 2012, was $25,603.79. That appears to be the last date reflected in the banking records respecting 142’s TD Canada Trust account. III. Liability of Ravita [ 41 ] With this background in mind, I will now set out my findings respect the nature of the contractual relationships amongst the Plaintiff, Amrik, Ravita, and 142. Those relationships were both ill-defined and unorthodox.

Had the parties had the foresight to obtain legal advice, it is unclear how the arrangements might have been structured. [ 42 ] It is at least agreed by all that there was a 50-50 partnership agreement between the Plaintiff and Amrik. It was agreed that they would each contribute money into the partnership, $40,000 by the Plaintiff and $40,000 by Amrik. The deal was that the company’s

profits would be divided evenly. [ 43 ] However, the Plaintiff and Amrik were not the only parties to the agreement. All of the witnesses testified that the plan was to have the business operated by a company controlled evenly by Ravita and Khush. However, on an interim basis it would be necessary to have the business operated by 142. The money derived from the business would be paid initially to 142 but would then be divided between the Plaintiff and Amrik. [ 44 ] I find that Ravita was a party to this contractual agreement. There was a family meeting at which the agreement was discussed.

Ravita’s testimony was to the effect that “I didn’t say anything, I said OK.” Although cryptic, I take this response and the overall content of her testimony to confirm that she was included in these discussions and that she accepted the proposal. [ 45 ] Ravita has been found to be personally liable for obligations arising from the business on two prior occasions.

By a Judgment dated October 8, 2013, from the Provincial Court of Alberta (Civil), Khush was awarded $5,200 for lost wages and $747.25 in costs “[a]s against Defendants 1420477 Alberta Ltd. & Ravita Sodhi, ONLY.” Ravita was also found liable to the Plaintiff by Master Schlosser, Q.C. (as he then was) in the context of a

summary judgment decision dated November 30, 2016, in the amount of $2,905.38. Although the brief reasons of Master Schlosser appear to turn upon unjust enrichment as the applicable cause of action, the Provincial Court’s Judgment entails a finding that Ravita was personally liable for employment wages. [ 46 ] Ravita’s obligations under the agreement included an obligation to cause 142 to account to the Plaintiff for 50% of the business’s assets.

It was necessary for her to accept this responsibility, since she was a part owner and a Director of 142, and all of the parties agreed that the revenues that 142 would be receiving was not all to be retained or expended by 142. Ravita, Amrik and the Plaintiff agreed that 50% of the profits experienced by the business and paid to 142 would then be paid to the Plaintiff. [ 47 ] Ravita’s involvement was not a one-sided promise on her part. She also received consideration under the agreement. It was agreed that she would eventually share ownership and control of the business with Khush.

In other words, the Plaintiff and Amrik promised to convey the business to a company that was later incorporated with Ravita and Khush as the shareholders. The business was to be half Ravita’s, and this was to her benefit. [ 48 ] In conclusion, I find that Ravita was not a mere bystander to the agreement. Rather she was a party to the agreement. She agreed to cause 142 to operate the business at the outset, to receive the revenues, to pay the expenses, and to account to the Plaintiff for 50% of the profits.

In exchange, Ravita received a promise that the business would later be transferred to a company in which she held a 50% interest. [ 49 ] As is apparent from this conclusion, I do not accept the proposition that the Plaintiff agreed to contract exclusively with a corporation, 142, and not Ravita. Ravita was personally involved in the discussions, and she assented to the proposed arrangements.

There is nothing in the evidence which suggests that the Plaintiff was notified or otherwise made to understand that his recourse for non- payment was limited to the corporation itself and not to the individuals with whom he had made these arrangements. [ 50 ] In the alternative, I find that the Defendants’ receipt of the Plaintiff’s share of the business’s assets for no consideration and with an acceptance of a duty to account to the Plaintiff for his share constituted a resulting trust: Miller v Walker , 2006 ABQB 424 at para. 29 . IV.

Assessment of Damages or Compensation [ 51 ] I turn now to the Plaintiff’s entitlement to the assets of 142 that existed after the termination of the business. Unfortunately, given the relatively small amount involved, neither side has submitted expert evidence on this issue. Consequently, amateur accounting is required. [ 52 ] As noted above, the balance in 142’s bank account at the close of business on February 22, 2012, was $35,663.02. A further $800 was deposited into the account the next day representing the returned damage deposit on the Barrhead apartment.

There were then various debits and credits in and out of that account until the end of March, 2022, and the Plaintiff acknowledges that $5,687.20 represents legitimate business expenses that occurred after the closure of the business. On April 19, 2012, a payment into 142’s account was made by Parkland in the amount of $30,642.33. The Plaintiff does not claim an entitlement to any of the other credits into 142’s account.

The Plaintiff therefore seeks (($35,663.02 + $800 + $30,642.33) - $5,687.20) ÷ 2 = $30,709.08 in damages. [ 53 ] The Defendants have submitted unaudited financial statements prepared by an accounting firm which reflect the conclusion that the business lost $22,242 by the time it closed in February, 2022. If this figure were to be accepted in calculating damages, the Plaintiff would be entitled to be paid ($80,000 - $22,242) ÷ 2 = $28,879. [ 54 ] Subject to the set-offs discussed below, I adopt the Plaintiff’s proposed damages amount of $30,709.08.

The Defendants did not call any accountants to testify in support of the figures reflected in the unaudited financial statements, and the basis for their calculations is unclear. As the parties with exclusive control of the bank accounts, the onus is upon the Defendants to justify their expenditures from that account, and they have not attempted to do so. The numbers are also obscured by the fact that Amrik chose to use the company’s bank account to finance his gambling and because the Defendants have not attempted to explain or justify numerous debits and credits in 142’s account.

Given these considerations, I find it appropriate to accept the Plaintiff’s quantification of his damages. V. Set-Off [ 55 ] I turn next to the amounts that the Defendants claim to be entitled to set-off against the amounts owing to the Plaintiff.

[ 56 ] Firstly, the Plaintiff’s acknowledge that the Defendants may set-off the amount of $2,600 representing one half of the lost wages paid to Khush Dave pursuant to the Provincial Court Judgment. The Defendants are not entitled to set-off the portion of that Judgment representing costs. [ 57 ] I turn next to three payments that the Defendants allege to have been made by Amrik to the Plaintiff. The first two alleged payments are cash payments of $7,000 each that Amrik claims to have made to the Plaintiff’s wife, Darshana Dave at her home.

Darshana testified through an interpreter and denied ever having received any money from Amrik. [ 58 ] Amrik also claims to have provided the Plaintiff with some jewellery which Amrik suggests was worth some $5,500. There was no appraisal of this jewellery put into evidence.

The Plaintiff and his wife also deny having received any such jewellery. [ 59 ] Although there do exist banking records that show withdrawals from Amrik’s line of credit, the Defendants do not have any receipts or other independent records confirming that Amrik provided the cash payments or the jewellery to the Plaintiff. [ 60 ] This issue boils down to a credibility assessment between the Plaintiff and Darshana on the one hand and Amrik on the other. [ 61 ] In this context, I much prefer the testimony of the Plaintiff and Darshana, and I do not accept the testimony of Amrik. [ 62 ] The main reason why I am not prepared to take Amrik at his word is that he has demonstrated through his actions that he is prepared to act in a dishonest manner when doing so suits him.

He admits that 142 was required to account to the Plaintiff for 50% of the profits of the business. Despite this, he made at least 15 cash withdrawals from 142’s bank account between January and April, 2012, to finance his personal gambling habit. Each one of these withdrawals was a dishonest act. When pushed on cross examination, he eventually acknowledged that he had not told the Plaintiff that he was doing this. [ 63 ] Problems with Amrik’s version of events were also exposed on cross-examination. His testimony was generally vague and often illogical and incoherent.

He claimed that he paid the cash to the Plaintiff when the Plaintiff asked him for $10,000 to assist in paying for Khush’s wedding. Yet, Amrik alleges that he paid two payments of $7,000 in March of 2012. He was unable to provide any coherent explanation as to why he paid $14,000 in two installments rather than the $10,000 that he claims the Plaintiff requested. [ 64 ] Further, at the time that these payments were made, the balance in 142’s bank account exceeded $10,000.

Amrik had no coherent explanation as to why he would pay $14,000 from his own persona line of credit in two instalments of $7,000, rather than simply pay the Plaintiff from the money in 142’s account that he was entitled to. [ 65 ] In short, the Plaintiff made a mistake in trusting Amrik. I will not make the same mistake. I conclude that the two cash payments of $7,000 were not made by Amrik to the Plaintiff’s wife Darshana, and that the jewellery was never provided to the Plaintiff.

It is much more likely that Amrik spent this money and sold or pawned the jewellery to finance his gambling habit. [ 66 ] As a secondary matter, I find that the Defendants have not established that any jewellery provided to the Plaintiff was of any value. There is no convincing evidence as to either the nature or the value of that jewellery. [ 67 ] I turn now to a set-off claimed with respect to certain cigarettes that allegedly went missing from the gas station operation. I do not give the Defendants any credit for these alleged losses.

If any such losses did occur, they would have been accounted for in the closing inventory conducted with Parkland. Any such losses are therefore already included in the business losses experienced by 142. [ 68 ] Amrik has also claimed that some $4,800 in cash, mostly change, was in the gas station when the business closed and divided and that that has not been accounted for. I note that no mention of this was made in Amrik’s previous Affidavit respecting an accounting of payments.

In any event, it appears that there was an even split of any such money at the time the business closed. [ 69 ] Finally, the Defendants claim set-off on the basis that the Plaintiff kept all of the furniture that had been purchased for the Barrhead apartment. I do not accept Amrik’s testimony on this point and prefer the testimony of Khush Dave who testified that Amrik kept the dining table set, and so it was agreed that the furniture had been divided on an equal basis. [ 70 ] I find that the Plaintiff is entitled to damages in the amount of $30,709.08 minus set-off in the amount of $2,600, or $28,109.08. VI.

Conclusion [ 71 ] The Plaintiff is awarded Judgment against all three Defendants Ravita Sodhi and 1420477 Alberta Ltd. in the amount of $28,109.08 plus pre-judgment interest. The Plaintiff does not seek judgment against Amrik and so none is granted. [ 72 ] The parties may address costs in writing within 30 days. Heard between the 19 th - 23 rd day of June, 2023. Dated at the City of Edmonton, Alberta this 22 nd day of December, 2023.

N.J. Whitling J.C.K.B.A. Appearances: Dennis Buchanan Nickerson Roberts Holinski & Mercer for Sanatkumar Dave Tanya Kelm Castle & Associates for Amrik Sodhi and 1420477 Alberta Ltd.