The independent assessment of Paramount Fine Foods ordered by a judge

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A judge has ordered changes to the boardroom and an independent assessment of Paramount Fine Foods’ finances to resolve a crippling dispute between prominent businessman Mohamad Fakih and majority equity investors seeking to remove him as a leader and director of the Lebanese restaurant and restaurant chain which he founded in 2007 shortly after immigrating to Canada.

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« The deadlock must be broken or everyone will go down with the ship, » Ontario Superior Court Judge Michael Penny said in a ruling Thursday in the long-running dispute over the food empire that had grown to dozens of places by 2020.

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The judge ordered a three-month stay on a voting rights deal that gives Fakih control of Paramount, although his investors Ali Noureddine and Mirza Naeem Javed together hold a majority stake.

But Penny said it was not in Paramount’s interest to remove Fakih, who « has a knowledge of Paramount that no one else has » and guided the food company through the difficult years of the COVID-19 pandemic.

« His skills and ability to manage some aspects, at least, of the businesses’ operations were not challenged by anyone, » the judge said, adding that Fakih « managed to keep the business going under very adverse circumstances. »

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But he said Fakih had been ‘stubborn and uncooperative’ with his investors, who argued in court papers that he had moved funds between Paramount and a number of companies he owned outside of the food business. , and used money to fund personal interests, including expensive vehicles and real estate.

Fakih, who is also known for his philanthropy and was named a member of the Order of Canada in January, could not be reached for comment.

Investors also said that Fakih did not properly maintain the company’s books and records and that it was difficult to assess Paramount’s condition even when they retained the services of a third party, A. Farber & Partners. Inc., to assess the state of the business and its potential. restructuring possibilities.

Penny said Fakih’s conduct raises serious issues of oppression for the trial and that the filings contain « extensive evidence of questionable dealings that reveal personal dealings on Fakih’s part. »

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These included Paramount paying a $2.3 million mortgage on Fakih’s home and renting a high-end Mercedes in March for a total cost of $400,000 « at the same time, Fakih claimed that Paramount could not afford to pay auditors to audit Paramount’s financial statements, » the judge said.

Based on its findings, Penny granted the emergency measures requested by the majority shareholders, including the suspension of the voting rights agreement, the appointment of a third neutral director and an extensive legal investigation.

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The judge ordered that a third administrator be appointed within 10 days to try to break the deadlock. If Fakih and his investors cannot agree on an additional director, they must each present a candidate to the judge.

They were also ordered to retain someone to perform an audit of Paramount for the years 2016 to 2021. The judge said he ordered Grant Thornton LLP be appointed in April to perform these assessments, but that did not happen.

“It is clear that the impasse will continue unless dramatic action is taken,” Penny said in her ruling. « The status quo involving impasse between directors and shareholders, Paramount’s inability to rationally assess the issues it faces, lack of trust and competing litigation among shareholders – these factors are, if they persist, likely to lead to financial catastrophe”.

He ordered Fakih to pay costs in the latest legal dispute, amounting to $102,500.

John Pirie, partner at law firm Baker McKenzie LLP and counsel for the majority shareholders, said his clients are pleased with the decision and « look forward to working with the new board to strengthen Paramount’s business in 2023. » .

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