KINGSTON
COURT FILE NO.: 16022/05
DATE: 2014/07/22
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Perry Murphy and 883535 Ontario Ltd., Plaintiffs
and
Philip Stefaniak, 1178509 Ontario Limited, Sil-Jack Investments Limited, and 547994 Ontario Limited, Defendants
BEFORE: Mr. Justice Timothy Minnema
COUNSEL:
Perry Murphy in person
Brannan Meiklejohn, agent for G.G.Piccin, for the Defendants
HEARD: June 26, 2014
ENDORSEMENT ON MOTION
[1] On May 12, 2014, an order was made removing the solicitor of record for both plaintiffs. Pursuant to sub-rule 51.01(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a corporation shall be represented by a lawyer except with leave of the Court. The plaintiff Perry Murphy is the sole officer, director, and shareholder of 883535 Ontario Ltd. He moves for leave to represent the corporate plaintiff.
Background Facts
[2] This case has been before the courts for many years and has been very heavily litigated. As a sampling, the background facts are summarized in a series of decisions where the plaintiffs were first granted interim costs (2008 40967 (S.C.J.)), leave was given to appeal that decision (2008 60333 (S.C.J.)), and on appeal the interim costs decision was set aside (2010 ONSC 971 (Div. Ct.)). In the original interim costs decision dated August 14, 2008, it was noted that Mr. Murphy purchased real property through the corporate plaintiff in 1992, and that the plaintiffs were in financial difficulty. Those findings were not challenged in the leave application or the appeal itself, or, other than as noted below regarding the mortgage, on this motion. Mr. Murphy’s home is the only asset owned by the corporate plaintiff, and it was remortgaged in April of 2013.
Issues
[3] The issues are found in the position of the defendants who maintain that:
the mortgage of over a year ago suggests that the corporate plaintiff now has the funds to hire a lawyer for this litigation, and, without evidence to the contrary, Mr. Murphy should not be granted leave to represent the corporate plaintiff; and
leave should not be granted because Mr. Murphy is not capable of adequately representing the corporate plaintiff.
Case Law
[4] In Lamond v. Smith, 2004 ONCJ 130, 2004 CarswellOnt 3212 (S.C.J.), the court examined a similar request by a personal defendant to represent a corporate defendant. The court held that where the request was being made by a sole officer, director and shareholder of the company, neither the moving party’s capabilities, absent proven mental incompetence, nor the ability or inability of the corporate litigant to afford a lawyer, are relevant factors. Leave was granted. This decision was followed in Mirashrafi v. Circuit Center, 2007 CarswellOnt 3839 (S.C.J.) which found that with respect to a closely held two-person company the financial status of the corporation was not a relevant factor, and leave was also granted.
[5] Extend-A-Call Inc. v. Granovski, 2009 33047 (ON SC), 2009 CarswellOnt 3754 (S.C.J.) and De La Rocha v. Markham Endoscopy Diagnostics Inc., 2010 ONSC 5100 (S.C.J.) are two decisions by the same judge. The court listed six relevant factors generally considered on such motions, and these include whether the proposed representative is reasonably capable of advocating on behalf of the corporation, and whether the corporation is financially capable of retaining counsel. However, Lamond v. Smith was still cited in those decisions for the proposition that “where the corporation is closely held and there is a sole director, officer and shareholder, it is hard to justify not allowing that individual to represent the company …” In Extend-A-Call Inc., the moving party was the sole shareholder and officer, but the court still assessed whether the plaintiff corporation was financially able to retain counsel. It found that it was not, and leave was granted. In De La Roche, the moving party was not the sole director, and provided no evidence of the corporate structure or the breakdown of the shareholdings in the corporation. Leave was not granted.
[6] In J.C. Nature Source Health Centre Inc. v. ISO Renovation Design, 2013 CarswellOnt 13539 (S.C.J.), the court cited the decision in Lamond, and in particular the passage quoted in the above paragraph. However, that case did not involve a closely held company and the proposed representative was not even a director. The court assessed the factors listed in Extend-A-Call Inc. and De La Roche and leave was not granted.
[7] In DM Urban-Scape Property Developments Ltd. v. Body Blitz Spa East Inc., 2014 CarswellOnt 3168 (Master), the plaintiff was a “one-person company”. Even though J.C. Nature Source did not deal with a closely held corporation, it was relied on for the proposition that the relevant factors to be considered included whether the company was financially unable to retain counsel and whether the proposed representative was capable of representing the company in the civil action. These were analyzed and leave was denied.
Analysis
Financial Resources
[8] As noted, the defendants, relying on the mortgage transaction, maintain that the plaintiff corporation has not established an inability to retain counsel and therefore leave should be denied. Mr. Murphy indicated that he did not provide that information because Lamond says it is irrelevant. The defendants indicated in response that they had sent Mr. Murphy the DM Urban-Scape and J.C. Nature Source decisions in advance of this hearing, so he should have known that the law had changed. Mr. Murphy acknowledged receiving those cases but disagrees that the law has changed. He added that the defendants are attempting to hide behind a legal technicality because they already know that the plaintiff company did not keep any significant money from the refinancing, rather it went to tax arrears, penalties, and interest.
[9] Before turning to the legal test, I note regarding Mr. Murphy’s latter point that the defendants do indeed appear to have independent knowledge the mortgage transaction. They introduced a letter themselves dated October 30, 2012 from Mr. Murphy’s previous lawyer to their lawyer explaining an agreement that resolved previous motions. The defendants had mortgages on title of Mr. Murphy’s home, owned by 883535 Ontario Ltd. They agreed to discharge them to allow Mr. Murphy to refinance. He was permitted to obtain a new first mortgage of up to $150,000 with the requirement that the funds be first used to satisfy an existing bank mortgage of $44,000.00, and then used “to satisfy all the municipal taxes inclusive of interest and penalties”. An additional $75,000 mortgage was also registered as security for any amounts owed by Mr. Murphy to the respondents as a result of this litigation. Despite their central role in that transaction, the defendants have not identified any excess amount of funds that they allege the plaintiffs retained after the noted payments. Rather, their position is simply that Mr. Murphy has failed to provide evidence that there was no excess, and he has therefore failed to prove an inability of the company to retain legal counsel.
[10] There is no avoiding that on one hand Lamond and Mirsahrafi, and on the other hand Extend-A-Call Inc. and DM Urban-Scape, appear to be inconsistent. All involved closely held companies, yet they came to different conclusions as to whether the ability or inability of the corporation to afford a lawyer is a relevant factor on a motion by the director/shareholder for leave to represent the company. I am inclined to apply the Lamond decision. Even in Extend-A-Call Inc. and DM Urban-Scape it is treated as a leading case, although not followed on this point. For the reasons given in paras. 13 and 14 in Lamond, I cannot see how the financial position of the company is relevant here. Mr. Murphy certainly has the authority to act for and bind the corporation, and he is sufficiently knowledgeable about its affairs. The positions of the corporation and Mr. Murphy are largely indistinguishable. Mr. Murphy’s home is the only asset that is held by the corporate plaintiff. The home is mortgaged and already provides some security for the defendants in this litigation. Mr. Murphy is now participating as a self-represented litigant himself in his personal capacity. This action has gone on for an inordinate length of time and in my view should not be further delayed by a requirement that Mr. Murphy find the resources to retain a lawyer for the corporation when he has not done so for himself for whatever reason. I find, considering all the above, that the failure of the plaintiffs to provide detailed evidence that the corporation does not have the ability to retain counsel is not fatal to their leave request.
Capabilities of Mr. Murphy
[11] The Lamond decision says with respect to the proposed representative that “[a]bsent proven mental incompetence, his intelligence and litigious capabilities … are quite irrelevant” (para. 11). DM Urban-Scape, at para. 6, draws from J.C. Nature Source and it says, at para. 13(v), that “[t]he proposed representative should … be reasonably capable of comprehending the issues and articulating the case on behalf of the corporation”. Although, again, J.C. Nature Source was not dealing with a closely held company, I note that these two statements of law are not dissimilar. From the evidence filed, it is clear that Mr. Murphy has operated as a real estate agent and, at least indirectly, as a real estate developer in the past. I have listened to him argue this motion. He is reasonably articulate and able to communicate his position. While his materials are far from lawyer grade, for a self-represented party they are minimally adequate. I find no evidence of mental incompetence or of a general lack of comprehension.
[12] The defendants also argue, again relying on DM Urban-Scape, that Mr. Murphy’s conduct is to be considered in determining whether he is capable of representing the company. They cite his less than exemplary behavior at heated examinations for discovery that took place over two and a half years ago when both he and the company had legal representation. However, denying Mr. Murphy leave to represent the company would not remove him as a participant in this action. I also note that he was appropriate and respectful to the defendants’ counsel and the Court in this hearing. In my view it would be a disproportionate penalty to deny leave based on such dated conduct.
Decision
[13] Mr. Murphy’s motion for leave to represent 883535 Ontario Ltd. in this action is granted.
[14] The plaintiffs’ motion was to request an indulgence. It is not obvious to me that the defendants’ opposition was inappropriate given that the legal issues were somewhat complicated. The matter was important, and needed to be resolved before this case could move forward. This motion may not have proceeded at all had Mr. Murphy simply addressed the company’s finances directly in his evidence, relevant or not. No order as to costs.
Mr. Justice Timothy Minnema
Date: July 22, 2014