Royal Bank of Canada v. Goldman et al., 2015 ONSC 967

COURT FILE NO.: CV-13-10039-00CL

DATE: 20150302

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Royal Bank of Canada, Plaintiff

AND:

FTVRB2 INC., FTVRTZ INC., NMF-TV INC., JANICE OLIVIA GOLDMAN and AARON GOLDMAN, Defendants

BEFORE: Mr. Justice T. McEwen

COUNSEL: C. Francis, for the Plaintiff

Aaron Goldman, in person

J. Kary, for Janice Goldman

S. Mitra, for James Williams and Associates Inc.

R. Literovich, for the non-party Manitoba Film and Music Recording Development Corp.

HEARD: February 9, 2015

ENDORSEMENT

[1] The defendant Aaron Goldman (“Goldman”) brings this motion seeking an order that he be granted leave to represent FTVRB2 INC., FTVRTZ INC. and NMF-TV INC (“the corporate defendants”) in this action, as well as leave to represent the corporate defendants in any legal proceedings stemming from this action.

Background

[2] In 2010 the plaintiff Royal Bank of Canada (“RBC”) provided loans to the corporate defendants to finance the production of certain television series. By way of security, the corporate defendants provided RBC with a film production security agreement, and a direction to the federal and provincial taxing authorities, requiring tax credits paid in connection to the productions be paid to RBC. Ultimately the loans to the corporate defendants became due and the corporate defendants could not pay. Goldman, the director of the corporate defendants, took the position that RBC delayed in submitting the appropriate documentation in support of the tax credits to the appropriate government authorities and breached oral promises of additional financing. Ultimately the relationship between RBC and Goldman broke down. RBC retained Minden Gross LLP as counsel and referred the matter to its Special Loans and Advisory Services Group.

[3] It was at this time RBC claims that it discovered that it had previously advanced loans to Freedom Studios Inc. (“Freedom”), a corporation controlled by Goldman, in the 1990s. That led to a lawsuit brought by Goldman and Freedom against RBC for $250 million dollars. Goldman and Freedom were represented by counsel. This action was dismissed in 2006. Goldman and Freedom unsuccessfully appealed the decision. Costs were ordered against Goldman and Freedom. These costs were never paid to RBC.

[4] With respect to the events that make up the current litigation, RBC made a demand to the corporate defendants to pay the outstanding amounts. This did not occur. RBC then brought a motion for the appointment of James Williams and Associates Inc. (“James Williams”) as Receiver of the corporate defendants. In March 2013 Morawetz J. adjourned the receivership motion but appointed James Williams as Monitor of the corporations. Goldman consented to the monitor order on behalf of the corporate defendants. Over time the terms and conditions of the monitor order were extended. Goldman and the corporate defendants retained counsel. Goldman, Freedom and RBC executed a forbearance agreement on April 26, 2013. Further, Goldman executed a consent to judgment in favour of RBC with respect to his personal guarantee of the indebtedness of one of the corporate defendants on May 6, 2013. Ultimately, after a number of extensions were granted by RBC with respect to the forbearance agreement, the corporate defendants still could not repay their indebtedness to RBC. After a few adjournments the receivership motion was heard on November 29, 2013, peremptory to Goldman and the corporate defendants.

[5] On November 29, 2013 Goldman represented himself while the corporate defendants were represented by counsel. Mesbur J. granted RBC a receivership order despite Goldman’s request to file further affidavit evidence, adjourn the motion, cross examine on affidavits and other related relief. Mesbur J. quite properly concluded that Goldman and the corporate defendants had received plenty of indulgences, had failed to cross examine in a timely way, and had received several extensions to the forbearance agreement.

[6] The receivership order granted by Mesbur J. was with respect only to the tax credits and did not relate to the operation and management of the corporate defendants. Of note is the fact that Goldman is a creditor who stands in line after RBC. At the time of the receivership order the amount owed to RBC was approximately $2,400,000.00.

[7] On December 11, 2013 RBC obtained judgment against Goldman for $1,260,000.00 plus costs. Goldman initiated an appeal from the order of Mesbur J. but the appeal did not proceed.

[8] Goldman and James Williams have endured a fractious relationship with Goldman alleging that James Williams has acted negligently and inappropriately while pursuing the tax credits to the detriment of the corporate defendants and Goldman. RBC and James Williams strongly contest these allegations and point to, what they submit, has been Goldman’s own disruptive behavior. Given this behavior, which will be outlined below, RBC submits that Goldman ought not be allowed to represent the corporate defendants who now do not have the benefit of counsel.

The Law

[9] As stated by Boswell J. in Extend-A-Call Inc. v. Dmitri Granovski et al., 2009 33047 (ON SC), the Court should have regard to the following factors before granting leave to a layperson to represent a corporation:

(i) Whether the proposed representative has been duly authorized by the corporation to act as its legal representative;

(ii) Whether the proposed representative has been duly authorized by the corporation to act as its legal representative;

(iii) Whether the proposed representative has a connection to the corporation;

(iv) The structure of the corporation in terms of shareholders, officers and directors and whether it is a closely held corporation;

(v) Whether the interests of shareholders, officers, directors, employees, creditors and other potential stakeholders are adequately protected by the granting of leave;

(vi) Whether the proposed representative is reasonably capable of comprehending the issues in the litigation and advocating on behalf of the corporation. The Court should not impose too high a threshold at this stage, given that the courts abound with self-represented litigants of varying skills. The proposed representative should, however, be reasonably capable of comprehending the issues and articulating the case on behalf of the corporation;

(vii) Whether the corporation is financially capable of retaining counsel. Access to justice has been a concern troubling courts at all levels in Canada for some considerable time. It is fundamental to integrity of the courts and the reputation of the administration of justice that parties have reasonable access to our courts. If the refusal to grant leave would effectively bar a corporation from access to justice, this factor should be given considerable weight; and,

(viii) Any other relevant factor specific to the circumstances of the individual case.

[10] With respect to the aforementioned test the Court may also consider whether the layperson will act in a responsible manner. In this regard the Court can consider previous conduct of the layperson in the current action or other actions: Extend-A-Call Inc. v. Dmitri Granovski et al., 2009 33047 (ON SC), DM Urban-Scape Property Developments Ltd. V. Body Blitz Spa East Inc. et al., 2014 ONSC 1616, Pitney Bowes of Canada Ltd. V. AA Printing Inc., 2009 CarswellOnt 9594.

Goldman’s Position

[11] Goldman submits that he is an appropriate person to represent the corporate defendants. Janice Goldman supports his motion. He cites the following reasons:

• he is the sole director of the corporate defendants;

• he has been authorized by the shareholders to act for the corporate defendants;

• the corporate defendants are closely held;

• the corporate defendants cannot afford to retain a lawyer;

• he is reasonably capable of representing the corporate defendants given his background. He concedes that he cannot claim to be objective but that he can act in a reasonable fashion and not to the detriment of the other interested parties;

• the interests of the shareholders, who support him, would be protected by him acting for the corporate defendants; and,

• if he does not act for the corporation no one else is prepared to do so or able to do so and that the corporations will be denied access to justice in circumstances where there is a legitimate dispute as to whether the receiver is taking adequate steps to pursue the tax credits.

[12] With respect to the above Goldman relies upon a number of affidavits that were sworn by individuals in advance of the receivership hearing conducted by Mesbur J. that speak of his good character and of RBC’s purported failures.

The Position of RBC

[13] RBC, as noted above, relies upon a number of factors which in its view, render Goldman unsuitable to represent the corporate defendants. RBC’s position is supported by the non-party Manitoba Film and Music Development Corp. who is affected by this order. James Williams takes no position at the motion but strongly objects to Goldman’s characterization of its performance as Receiver.

[14] RBC’s position is that Goldman is not capable of representing the corporate defendants because he lacks objectivity and on previous occasions he has acted in an improper manner. It submits that the only purpose for the representation order is to wreak further abuse. RBC also submits that Goldman lacks standing as he is currently a judgment debtor. RBC has no case law, however, to support this submission and I can see no reason in law why, on that basis alone, he could not represent the corporate defendants.

[15] Insofar as the other objections are concerned, RBC points to the fact that if Goldman is allowed to act for the corporations his stated goal, as evidenced in his materials and the endorsement of Newbould J. dated December 3, 2014, is to achieve the following:

• to set aside the receivership order notwithstanding the fact it was granted over one year ago and the attempt to appeal the order did not proceed;

• to bring a motion to set aside the forbearance agreement that was executed on April 26, 2013;

• to set aside the judgment of Morawetz J. against Goldman dated December 11, 2013;

• to remove Minden Gross LLP as counsel for RBC; and,

• to cross examine RBC employees on their affidavits that were sworn in support of the receivership motion in 2013.

[16] Goldman does not despite that this is accurate.

[17] In addition to the above Goldman, both in his written materials and in oral argument, has made a number of troubling accusations and statements as follows:

• he admittedly wants to use information obtained in this action to “reopen” the lawsuit that he lost against RBC in 2006;

• he is of the view that Mesbur J.’s order, as per paragraph two, allows him the right to pursue the tax credits on his own if, in his opinion, the Receiver fails to take necessary steps or actions and he has done so;

• he has made allegations of improprieties against judges who have dealt with this action;

• he has made allegations of professional negligence against previous counsel retained by him and the corporations;

• he alleges that RBC and its counsel conspired to commit perjury and intentionally deceive the Court to secure the receivership; and,

• he advised the Court during submissions that he sustained a head injury some years ago in a motor vehicle accident but that his involvement in the case has assisted with his cognitive recovery.

Analysis

[18] A review of the authorities demonstrates that leave is generally granted to allow a layperson to represent a corporation when it is a closely held private company and its shareholder or officer is seeking to be the representative.

[19] RBC does not generally contest the fact that Goldman meets the criteria set out in (i) - (vi) set out in Extend-A-Call Inc. Essentially, RBC urges me to rely on (vii) of the test, with the relevant factor being the fact that Goldman is seeking to obtain the order for abusive purposes and to re-litigate issues already decided. When dealing with a person’s past behavior the case law supports the notion that evidence of prior misconduct, that does not involve misconduct in the capacity of a legal representative, ought not to be seriously considered. Regard can be had, however, as to whether a person has acted inappropriately in attempting to advocate on behalf a corporate defendant in the outstanding case or otherwise: Extend-A-Call Inc.

[20] I am troubled about Goldman’s allegations against his former solicitor, RBC’s current counsel, judges who have dealt with this action, and with respect to the scope of the motions he states that he intends to bring. He has not, however, in the past engaged in misconduct in the capacity of a legal representative. He has acted inappropriately in advocating on behalf of the corporate defendants, but in my view it has not yet reached the level that would disqualify him from representing the corporate defendants. Further, it appears as though the corporate defendants would be denied representation if Goldman was not allowed to represent them which ought to be avoided if reasonably possible. It is not contested that there is no money for the corporate defendants to retain lawyers, nor is there anyone else willing to step forward and act on behalf of the corporate defendants.

[21] In any event, whether or not the order sought is granted Goldman can still pursue a number of the motions or complaints noted above in his own right. Similarly, some reasonable participation is required by him in pursuing the tax credits.

[22] In these circumstances, I am reluctantly prepared to grant the order sought. The granting of the order is, however, expressly conditional on RBC being able to move to set aside this order if, in the future, Goldman acts inappropriately as the representative for the corporate defendants. This order is not a blank cheque for Goldman to pursue any and all avenues he wishes and be insulated from the results, if unsuccessful.

[23] It remains to be seen as to what steps Goldman will take in the litigation. I would urge him, however, to re-evaluate some of his proposed future steps including cross examining the aforementioned affiants on affidavits sworn with respect to proceedings that have now been determined and/or seeking production of information in this action in an attempt to re-litigate the action previously dismissed in 2006.

[24] In my view, his efforts ought to be, generally speaking, confined to providing proper assistance to James Williams in securing the tax credits, bringing motions that have a reasonable prospect of success, and for properly defending motions brought against him. I would caution Goldman against dealing directly with government officials with whom James Williams has been pursuing the tax credits. Whether or not Goldman agrees with the plan of action, the receivership order allows James Williams to pursue those tax credits. If Goldman disagrees he can raise the issue with James Williams and/or seek an appropriate remedy before this Court.

Disposition

[25] Goldman shall be granted leave to represent the corporations in this action on a without prejudice basis to RBC’s right to move to set the order aside if, in future, RBC deems it appropriate to do so.

[26] Given the reasons above there shall be no order as to costs.

Mr. Justice T. McEwen

Date: March 2, 2015