Ontario Superior Court of Justice
Court File Nos.: CV-15-540713 and CV-15-540719 Motion Heard: August 8, 2016
Counsel: Robert D. Malen for the defendants Nancy J. Tourgis for the plaintiff
Endorsement
Master R.A. Muir
[1] There are four motions before the court in two separate but related actions. The defendants in both actions seek an order staying or dismissing these actions pursuant to Rule 15.02(4) of the Rules of Civil Procedure, RRO 1990, Reg. 194 (the “Rules”). The defendants take the position that the commencement of these actions was not properly authorized by the corporate plaintiff.
[2] The plaintiff is the same in both actions. It has brought cross-motions in both actions asking for leave to issue its statements of claim on a nunc pro tunc basis, if necessary.
[3] This is a family dispute. The president of the sole shareholder of the plaintiff corporation is Keith Alexander (“Keith”). The ultimate owners of the plaintiff are Keith’s three daughters. Keith is married to Sheila Alexander (“Sheila”). Keith and Sheila were going through matrimonial proceedings for part of 2015 but they have since reconciled.
[4] One of Keith’s daughters is Debra Alexander (“Debra”). Debra is married to the defendant Steven Warsh (“Warsh”). Warsh and Debra control the defendant D. Alexander Holdings Limited.
[5] This is a simple action, at least at first glance. The plaintiff claims it loaned the defendants $300,000.00 as evidenced by two promissory notes. The defendants take the position that the loan was a gift and does not need to be re-paid. It appears that the family dynamic at play has unduly complicated this proceeding.
[6] After the statements of claim were issued, the defendants sought confirmation that the plaintiff corporation had duly authorized the commencement of these actions. The plaintiff replied by stating that the actions had been authorized by Sheila, who was a director of the plaintiff.
[7] The defendants took issue with this response as it appears that Sheila had been removed as a director of the plaintiff by resolution dated October 2, 2015 while the matrimonial proceedings were ongoing. The statements of claim were issued on November 18, 2015 at a time when Sheila was no longer a director of the plaintiff. They were also issued by a lawyer who was not referred to in any of the documents signed by Sheila that purport to authorize the proceedings. They were therefore initiated without authorization and are improper say the defendants. The actions should be dismissed or stayed. A nunc pro tunc order should not be made as the defendants would be prejudiced by the fact that a limitation period in respect of one of the notes (action no. CV-15-540719) allegedly expired in the interim and before the plaintiff’s cross-motion was served.
[8] The plaintiff takes issue with the October 2, 2015 resolution removing Sheila. It argues that the resolution was invalid as it was made at a time when a preservation order was pending in the matrimonial proceeding and is contrary to the terms of that preservation order. The plaintiff also takes the position that the October 2, 2015 resolution was the result of undue influence. The plaintiff also argues that these collection actions were ostensibly authorized by Sheila before she was removed as a director, although they were not started until after she was removed. Finally, the plaintiff submits that Sheila was re-appointed a director of the corporation on November 30, 2015. Keith was also appointed a director on that date. Debra, who had previously been appointed a director on October 2, 2015, was removed as a director.
[9] In my view, the arguments advanced by the defendants simply amount to elevating form over substance. Rule 1.04(1) requires that the Rules be liberally construed to secure the just, most expeditious and least expensive determination of every civil dispute on its merits. The real issue in these claims is not whether they were duly authorized by the corporate plaintiff but whether the $300,000.00 advanced was a loan or a gift. The Rules should be interpreted so as to promote the resolution of that issue on its merits. Devoting countless hours to the question of corporate authorization does nothing to advance that objective.
[10] Nevertheless, the issue of proper authorization is before the court and must be decided. I am satisfied on the evidence that these actions were properly authorized and commenced by Solmon Rothbart Goodman LLP on behalf of the corporate plaintiff on November 18, 2015.
[11] It is clear from the evidence that Sheila decided to begin collection proceedings on the notes in September 2015 and instructed the plaintiff’s lawyers accordingly. On September 18, 2015 she sent a letter to the defendants demanding repayment and advising that enforcement proceedings would be taken if payment was not made. She provided a written direction to Symon Zucker on September 29, 2015 authorizing him to act on the promissory notes. The direction could have been better drafted but its intent is obvious. The notes were to be enforced by legal means. Two days later Mr. Zucker wrote to the defendants demanding payment by October 7, 2015 failing which legal action would be taken. All of these steps pre-date Sheila’s purported removal as director on October 2, 2015. At no time following Sheila’s removal as director were those instructions expressly altered or rescinded. It appears from Keith’s affidavit in the matrimonial action that he may have removed Sheila in order to stop the collection process but there is no evidence of any subsequent direction to the plaintiff’s lawyers altering Sheila’s initial instructions.
[12] The law does not specify a particular process a corporation must employ in order to initiate legal proceedings. The by-laws and other constituting documents of the plaintiff are apparently silent when it comes to authorizing litigation. In my view, when all of the circumstances are viewed in context, it is clear that a director of the plaintiff corporation authorized the commencement of these actions and that authorization was never altered or rescinded.
[13] I also note that the latest evidence from the current directors of the plaintiff corporation (Keith and Sheila) supports the continuation of these collection actions. A majority of the ultimate owners of the plaintiff also appear to support these claims.
[14] It is my view that nothing turns on the fact that the claims were issued by Solmon Rothbart Goodman LLP. A corporation is entitled to change lawyers without having to authorize litigation all over again after doing so. In any event, it is obvious that Solmon Rothbart Goodman LLP is authorized to pursue these claims by the plaintiff’s current directors.
[15] Finally, I am unable to make any determinations with respect to the allegations of undue influence and other improper conduct and whether or not the corporate resolutions of October 2, 2015 and November 30, 2015 are void as a result. It is clear from Keith’s cross-examination that he is suffering from memory problems. He suffered a stroke in June 2015. It is difficult to determine whether his medical condition may have contributed to his conflicting actions in the fall of 2015. I am also not prepared to make any findings that one party or another may have exercised undue influence over Keith or acted improperly. Such a finding would require an assessment of the credibility of witnesses and I am simply not prepared to engage in such an exercise on a motion of this nature.
[16] I have therefore concluded that these actions were properly authorized by a director of the plaintiff corporation and properly commenced accordingly on November 18, 2015. The defendants’ motions are dismissed. In view of my findings, there is no need to grant the relief requested by the plaintiff. Its motions are also dismissed.
[17] My conclusions on these motions do not prejudice the defendants. They are perfectly entitled to defend these actions on their merits. While the merits are not relevant to the issues on these motions, the defendants have nevertheless placed great emphasis on several statements made by Keith to the effect that the monies advanced were gifts and not loans. If they view this evidence as determinative, the Rules provide the defendants with various remedies in order to defend claims obviously lacking in merit. The defendants’ statements of defence shall be delivered by September 7, 2016.
[18] I wish to note that these actions are governed by the simplified procedure set out in Rule 76. Rule 76.04(1) provides that cross-examination on an affidavit and examination of a witness under Rule 39.03 are not permitted in Rule 76 actions. Nevertheless, the parties engaged in extensive examinations of this nature and all of the evidence from those examinations was filed and presented to the court as a fait accompli. No leave was sought from the court to introduce such evidence. It appears that counsel did not turn their minds to this issue. Under the circumstances, I determined that I had no choice but to accept and consider that evidence.
[19] I appreciate that these actions may not remain within the simplified procedure but they are currently governed by that Rule. It ought to have been complied with. For this reason, there will be no award of costs to either side for any time or disbursements incurred in relation to the cross-examinations and the Rule 39.03 examination.
[20] The plaintiff has been successful and is entitled to costs. However, I agree with the defendants that the costs sought by the plaintiff are excessive for a matter of this nature and are significantly greater than the defendants’ costs. I see no reason to depart from the usual practice of fixing costs and ordering they be paid within 30 days. This was a purely procedural motion. In my view, it is therefore fair and reasonable for the defendants to pay the plaintiff’s costs of these motions fixed in the amount of $6,000.00, inclusive of HST and disbursements. These costs shall be paid by September 7, 2016.
Master R.A. Muir DATE: August 8, 2016