ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-438
DATE: 2014-11-17
BETWEEN:
ALLAN CURLE, BRUCE JOHNSON, JEANETTE JOHNSON, NORALL GROUP INC. AND NORALL GROUP CONTRACTING INC.
Mr. Hacio, for Allan Curle, Bruce Johnson and Jeanette Johnson
Plaintiffs
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GINA GUSTAFSON, JUANITA CURLE, HOLLY LEBRUN, CARL GUSTAFSON, AND D.J. GUSTAFSON ENGINEERING LTD. C.O.B. AS AEGUS CONTRACTING
Mr. Holervich, for the Defendants Gina Gustafson and Juanita Curle
Mr. Matson, for the Defendants Holly Lebrun, Carl Gustafson and D.J. Gustafson Engineering Ltd.
HEARD: November 13, 2014
at Thunder Bay, Ontario
Regional Senior Justice H.M. Pierce
Reasons on Motion to Appoint Independent Counsel
Introduction
[1] This litigation arises from a dispute involving three couples and their closely-held corporations, Norall Group Inc. and Norall Group Contracting Inc. As a result of the dispute, the couples have split into two factions. One of the shareholders, Jeanette Johnson, is named as a plaintiff; she holds 16% of the corporate shares. The affidavit evidence claims that her co-plaintiff and husband, Bruce Johnson, does not object to her share-holding.
[2] The defendants include the majority shareholders, Gina Gustafson and Juanita Curle, who together control 84% of the shares in the plaintiff corporations. These parties are also directors of the corporations. Ms. Gustafson deposes that her husband, Carl Gustafson, who is also a defendant, does not object to her ownership of the shares.
[3] The majority shareholders seized control of the corporations and their assets, including the premises and corporate records. They removed the plaintiffs, Allan Curle and Bruce Johnson, as directors and assumed the directors’ role. Then the new directors served notice of an application to wind up the corporations.
[4] In general, Mr. Curle and Mr. Johnson take the position that the transfer of the shares to their respective spouses was intended as a trust for their families, while their spouses argue that the transfer of shares was a gift.
[5] At the heart of the dispute is control of the corporations: who are the directors? Who are the shareholders?
[6] An interim consent order is in place to ensure regular accounting for the affairs of the two corporations as the litigation grinds along.
[7] In reasons released October 7, 2014, Mr. Justice Fregeau stayed the claims of the corporate plaintiffs on the grounds that the directors did not pass a resolution to commence this litigation. He also removed Mr. Hacio as counsel for the corporate plaintiffs. At para. 62 of his reasons, he ordered that the corporate plaintiffs could recommence the action “by independent counsel acting on their behalf, if and when independent counsel is appointed, and pursuant to a duly authorized resolution of directors of each company.”
[8] The individual plaintiffs move for an order appointing independent counsel “to oversee and control the Plaintiff Corporations” under the supervision of the court.
The Positions of the Parties
[9] The personal plaintiffs submit that because the corporations may have different interests than those of the directors, independent counsel is required to represent the interests of the corporate plaintiffs and avoid conflicts of interest: Hames v. Greenberg, 2013 ONSC 4410, para. 63.
[10] As well, the personal plaintiffs cite Rule 15.01(2) which requires corporate parties to a proceeding to be represented by a lawyer absent leave of the court. They argue that independent counsel can offer the court insight into the best interests of the corporation and protect its assets.
[11] As to the mechanics of such an appointment, the plaintiffs argue that if the parties cannot agree on who should be appointed, the court can intervene. They say that the fees of independent counsel would be paid by the corporation, subject to any order attributing responsibility for fees to the parties.
[12] The defendants object to the appointment of independent counsel on several grounds:
Mr. McIvor is the corporate solicitor; a further appointment would be redundant;
all other parties are represented by counsel;
the claims of the corporations have been stayed; therefore there is no need for the appointment of counsel;
the individual plaintiffs, who could be characterized as complainants pursuant to s. 245 of the Business Corporations Act, have not commenced a derivative action to address corporate governance issues;
even if independent counsel is appointed, he or she will require instructions from a controlling mind; and
because the interim order protects the interests of all parties, independent counsel would not add anything.
Discussion
[13] I have concluded that the motion to appoint independent counsel for the plaintiff corporations should be dismissed.
[14] It is obvious from the size of the court file that this litigation has been drawn out and costly. To add additional counsel would exacerbate the cost and delay in resolving the matter. The parties who are interested in the outcome of the litigation are all represented by counsel. In addition, the interim order protects the corporate status quo, pending the outcome of the litigation. It is difficult to understand what other interest would be addressed by the appointment of independent counsel.
[15] Mr. Hacio submits that independent counsel would provide an objective position to the court. Respectfully, there are no objective positions in a law suit: there are only positions. Each position advances one party’s interest at the expense of another. I conclude that through the appointment of counsel, the individual plaintiffs are seeking to leverage their positions in order to recover control of the corporations.
[16] Ms. Gustafson deposes that since Allan Curle and Bruce Johnson were removed as directors, no offer has been made to purchase the shares of Ms. Gustafson or Ms. Curle, which would resolve the issue of control of the corporations.
[17] As well, there are practical considerations. The defendant directors are unlikely to pass a resolution to authorize the corporate plaintiffs to sue themselves. As Justice Fregeau observed, this is a precondition to the resumption of the corporate law suit.
[18] As well, independent counsel could not determine the best interests of the corporations without instructions. From whom would he or she take instructions? As the action is constituted, the majority shareholders and directors, from whom instructions, would presumably come, are defendants in the law suit. Independent counsel would be placed in an impossible conflict of interest in trying to obtain instructions from them.
Conclusion
[19] The motion to appoint independent counsel is dismissed. If the parties cannot agree on costs, either may apply to the trial coordinator within thirty days for an appointment to argue same, failing which costs will be deemed to be settled. Costs briefs are not to exceed five pages.
“Original Signed By”
Regional Senior Justice H.M. Pierce
Released: November 17, 2014
COURT FILE NO.: CV-12-438
DATE: 2014-11-17
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ALLAN CURLE, BRUCE JOHNSON, JEANETTE JOHNSON, NORALL GROUP INC. AND NORALL GROUP CONTRACTING INC.
Plaintiffs
- and –
GINA GUSTAFSON, JUANITA CURLE, HOLLY LEBRUN, CARL GUSTAFSON, AND D.J. GUSTAFSON ENGINEERING LTD. C.O.B. AS AEGUS CONTRACTING
Defendants
REASONS ON MOTIONS TO APPOINT INDEPENDENT COUNSEL
Pierce, RSJ
Released: November 17, 2014
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