CITATION: Curle et al v Gustafson et al, 2015 ONSC 2127
COURT FILE NO.: CV-12-0438
DATE: 2015-04-02
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.
Mr. Hacio, for Allan Curle, Bruce Johnson, and Jeanette Johnson
Plaintiffs
- and -
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: Written Submissions pursuant to Rule 62.02(2)
Mr. Justice F.B. Fitzpatrick
Reasons On Motion For Leave To Appeal Interlocutory Order
[1] The plaintiffs bring a motion for leave to appeal the interlocutory order of Pierce J. dated November 17, 2014. In that decision, Pierce J. declined to order the appointment of independent counsel for the corporate plaintiff in this very hotly contested corporate shareholders dispute.
[2] The plaintiffs argue that:
a) There are conflicting decisions by another judge or court in Ontario concerning when independent counsel should be appointed in a corporate commercial dispute; and
b) There is good reason to doubt the correctness of the order under appeal and the proposed appeal involves important matters.
[3] The test on an application for leave is set out in rule 62.02(4). There is no issue between the parties as to the test to be applied on motions of this type. The moving party has accurately and fairly set out the tests. In addition, it is well-settled that the test for granting leave on an interlocutory order is an onerous one: Bell Expressvu Ltd. Partnership v. Morgan, 2008 63136 (ON SCDC), [2008] O.J. No. 4758 (Div. Ct).
[4] Rule 62.02(7) directs that brief reasons be given on applications of this nature. I therefore think it not necessary to replicate the lengthy recitations of background facts as set out by both the moving party plaintiffs and the responding party defendants in the various facta filed on this motion for leave. Paragraphs 1 through 5 of the decision of Pierce J. accurately set out the background facts of this matter as follows:
[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’. 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?
[5] Dealing first with the assertion that the decision of Pierce J. conflicts with other Ontario decisions, the moving party plaintiffs cite four other cases as standing for the proposition that independent counsel should be appointed to represent a corporate plaintiff where the corporate plaintiff is a proper party to the litigation. These cases are: Edwards-McLeod Properties Ltd. v. 1037661 Ontario Ltd., [2001] O.J. No. 145 (S.C.); Hames v. Greenberg, 2013 ONSC 1622; Alles v. Maurice, [1992] O.J. No. 331 (S.C.); and Rice v. Smith, 2013 ONSC 1200. In a supplementary reply factum responding to the responding parties’ supplementary factum, counsel for the plaintiffs referenced a trial decision of Justice Wright in the Edwards-McLeod matter but that case was not provided to the Court.
[6] In my view, the provisions of Rule 62 dealing with the question of “conflicting decisions” speaks to the enunciation of different legal principles in other decisions that conflict with the ratio decidendi applied in the case at bar as contrasted with an exercise in finding cases that come to a some different result.
[7] Further, by my reading of the cases relied upon by the plaintiffs moving party, they do not stand for the proposition cited by the plaintiffs moving party. The cases involve motions to remove solicitors for corporate entities. The cases did not deal with the appointment of independent counsel on an interim basis, as was the case before Pierce J. In all of the cases, the main thrust of the decisions was the removal of lawyers. In none of the cases were independent counsel appointed simply because somebody asked for it.
[8] I agree with the submissions of the responding parties that all four cases cited by the plaintiff can be distinguished from this case on their facts. In addition to the differences on the facts, the cases cited by the plaintiffs do not disclose legal principles that I can see conflict with legal principles applied in the decision of Pierce J.
[9] In my view, the decision of Pierce J. was motivated by concerns of practicality. She analyzed the matter with a view to fairness to the parties and ensuring that legitimate competing interests could be brought forward when the matter is ultimately tried. This was most evident in the paras. 14, 17, and 18, which state:
[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.
[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.
[10] The cases cited by the plaintiffs all deal with the legal principles governing conflict of interest of solicitors acting for corporations where the shareholders may have divergent interests. This is a very different thing than a court considering whether or not to appoint independent counsel for a corporate plaintiff.
[11] The plaintiffs moving party has failed to satisfy me that there are conflicting decisions of courts in Ontario concerning when independent counsel should be appointed in a corporate commercial dispute.
[12] Turning now to a discussion of the second aspect of the test as set out in rule 62.02(4)(b). The plaintiffs summarizes several reasons given by Pierce J. and suggests all of them are sufficient to ground a finding that there is good reason to doubt the correctness of the order in question. These reasons are summarized as follows:
not appointing independent counsel is less costly to the parties (para. 14 of the decision);
the interim order of Fregeau J. protects the status quo;
the motion for appointment of independent counsel is really an attempt by the plaintiff to recover control of the corporation;
the defendants are unlikely to authorize the corporation to sue themselves (para. 17 of the decision);
the independent counsel would have difficulty taking instructions (para. 18 of the decision); and
the corporation already has counsel.
[13] In my view, none of these stated reasons gives rise to a concern that there is good reason to doubt the correctness of the decision. All of these reasons of Pierce J. make sense to me and are grounded in facts based on the conduct of the parties to date. In my view, the arguments raised by the plaintiffs on this motion were a rehash of the arguments made on the motion and were not persuasive that the decision reached by Pierce J. is open to serious debate.
[14] The plaintiffs in their materials ignores or glosses over a very significant factual feature of the litigation to date. The previous decision of Fregeau J. from October 7, 2014, found that the corporate plaintiff had no legal authority to commence the within action. Fregeau J. correspondingly stayed the action until such time as the appropriate actors, shareholders, or directors of the corporate party directed it to continue the action. In my view, it is therefore far from decided that the corporate plaintiff even has a bona fide claim at first instance.
[15] The plaintiffs attack the soundness of the decision of Pierce J. on the mistaken assumption that independent counsel would have the ability to somehow become the directing mind of the corporation. This is set out in several places in the plaintiffs materials, for example para. 48 of the factum, where it is stated “Independent Counsel will take over control of the Plaintiff Corporations if Independent Counsel is appointed”.
[16] This is a position that ignores the essential role of counsel both as advisor and advocate, but not that of directing mind of a party. It also ignores the fundamental nature of a corporation, which is a legal fiction by which real persons, shareholders assisted by elected directors can engage in enterprises with limited liability to themselves. The corporation is an extension of real people, with real abilities to make decisions about what the legal fiction they created will do or will not do. In this case, there are real people who are the shareholders and real people who are the directors. They are currently litigating against each other. The corporation is only a named plaintiff because one party improperly made it so. In my view, its interests have been adequately dealt with at this stage.
[17] In this matter, there is a bitter dispute between the shareholders and directors. They will have their day in court. However, the corporation is inactive. I agree that appointing independent counsel would simply add a further layer of complexity to this litigation and that it is not appropriate to do so at this stage in the litigation.
[18] The plaintiff does not have sufficient legal standing to control the corporation at this stage in the litigation. The interim order protects the status quo. The assertions about damages being done to the corporation are really assertions by the plaintiffs as to their particular view of the defendants actions as against their interest or possible interest in the corporation. The defendants take a contrary position. The stay order by Fregeau J. maintains the status quo from the corporation’s perspective. All shareholders and directors are represented by counsel. An independent counsel will not add anything to the litigation at this point. I agree that it appears the motion from which leave is sought was simply an attempt by the plaintiffs to try and leverage control of the corporation back to themselves. This is not an appropriate basis for an appointment of independent counsel.
[19] The decision of Pierce J. is not open to serious debate. It is sound and well-reasoned reflecting the state of the litigation and the actual standing of the parties in the matter at present.
[20] Also, the matter is not one of general importance. The facts of this case are unique. For example, the four cases cited by the plaintiffs represent the more general situation where the court ultimately left it to the shareholders or directors to choose counsel for a corporation, where the corporation has an active interest in litigation and where is has been properly made a party. This is not the case here.
[21] The plaintiffs moving party has failed to persuade me that there is good reason to doubt the correctness of the Order under appeal and the appeal involves important matters.
[22] I also see no reason to grant leave to appeal the cost order made by Pierce J. on February 10, 2015, in respect of the motion.
[23] For all of the above reasons, the motion for leave to appeal is dismissed with costs payable forthwith by the plaintiffs Allan Curle, Bruce Johnson, and Jeanette Johnson to the defendants Gina Gustafson, Juanita Curle, Carl Gustafson, and Holly Lebrun. The plaintiffs will be liable for paying costs as if they were faced by one lawyer only, and the quantum of costs fixed will be divided 50/50 between the two counsel representing the respective sets of defendants. If the parties cannot agree on costs, they make written submissions not exceeding two double spaced pages on or before April 17, 2015. If no submissions are received by that date, costs will be deemed to have been settled.
___________”original signed by”
The Hon. Mr. Justice F. Bruce Fitzpatrick
Released: April 2, 2015
CITATION: Curle et al v Gustafson et al, 2015 ONSC 2127
COURT FILE NO.: CV-12-0438
DATE: 2015-04-02
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 MOTON FOR LEAVE TO APPEAL INTERLOCUTORY ORDER
Fitzpatrick J.
Released: April 2, 2015
/mls