Court File and Parties

COURT FILE NOS.: CV-17-6802 and CV-17.6802 A1 DATE: 2021/01/06 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Leisure Farm Construction Limited, Plaintiff AND: Dalew Farms Inc., David Lewington and Chantal Lewington, Defendants AND: Seberras Professional Services Ltd., David Seberras and Roleo Seguin Construction (1987) Co. Ltd., Third Parties

BEFORE: M.G. Ellies R.S.J.

COUNSEL: D. Sirois, for the Plaintiff David Lewington, for the Defendant, Dalew Farms Inc.

HEARD: December 18, 2020

Endorsement

[1] David Lewington moves on behalf of Dalew Farms Inc. (“Dalew”) for leave to represent the corporation as a non-lawyer under r. 15.01(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] Mr. Lewington is one of two shareholders of Dalew. The other shareholder is his wife, Chantal Lewington. They own the company equally. Mr. Lewington is the President and Treasurer of the company. Mrs. Lewington is the Secretary. As its name implies, Dalew is in the farming business.

[3] The action in which this motion is brought involves a claim by Leisure Farm Construction Limited (“Leisure Farm”) for damages resulting from an alleged breach of contract by Dalew. Leisure Farm was hired to build a barn for Dalew. Dalew alleges that Leisure Farm was the party that breached the contract when it constructed a foundation that failed to pass inspection, as a result of which Dalew withheld payment. In the action, Dalew counterclaims for damages relating to remediation and completion of the work undertaken by Leisure Farms. Dalew also issued a claim against several third parties it alleged were partly to blame for the faulty construction.

[4] The facts were set out in detail by my colleague, Gauthier J., in an earlier motion (2017 ONSC 286) in which she dismissed the claims against Mr. and Mrs. Lewington personally and transferred the action from Sudbury to North Bay. I will not repeat the facts in any more detail here.

[5] Dalew and the Lewingtons were represented by a lawyer in the motion before Gauthier J. However, he was later removed at his request by virtue of an order I made on February 14, 2020.

[6] The law in this area is well-settled, although I am not sure it has settled in exactly the right place.

[7] Rule 15.01(2) provides that a party to a proceeding that is a corporation shall be represented by a lawyer, except with leave of the court. In Lamond v. Smith, 2004 CarswellOnt 3213, [2004] O.J. No. 3255 (Ont S.C.), Quinn J. questioned the need for this rule in the case of “small, one-man” companies. He wrote (at paras. 8 - 9):

I am unaware of the rationale for subrule 15.01(2). But, if it originated over a concern about whether the person seeking to represent the corporation has the authority to act for and bind the corporation or is sufficiently knowledgeable regarding its affairs, then the rationale surely must be weakened in the case of a small, one-man company.

There are cases holding that granting leave under subrule 15.01(2) should not be encouraged. However, I do not see why such an admonition need apply to small, one-man companies. [Footnotes omitted.]

[8] Quinn J. therefore allowed the defendant corporation to be represented by its sole shareholder. Courts have since applied the decision in Lamond to cases such as this one in which all of the shares of a corporation were owned by a husband and wife: Mirashrafi v. Circuit Center.

[9] In Extend-A-Call Inc. v. Granovski, Boswell J. reviewed a number of decisions, including the one in Lamond, and set out the following helpful list of factors to be considered when addressing a motion under r. 15.01(2) (at para. 19):

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

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

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

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

(5) 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;

(6) 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,

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

[10] Boswell J. referred again to these factors in De La Rocha v. Markham Endoscopy Diagnostics Inc., 2010 ONSC 5100, and added (at para. 3):

Ultimately, the court must give effect to what order is in the interests of justice and must pay heed to Rule 1.04 which directs the court to construe the rules so as to ensure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[11] Subsequent cases have grappled with the importance of the sixth factor list above, the ability of the corporation to afford a lawyer. In Murphy v. Stefaniak, 2014 ONSC 4396 (at para. 10), Minnema J. held that the failure of the moving party to provide detailed evidence that the corporation could not afford a lawyer was not fatal. This is in keeping with the decision in Lamond, in which Quinn J. also wrote (at para. 13):

Frankly, I do not see why the ability or inability to afford a lawyer should be a relevant factor. The court would not question a self-represented individual about his or her finances and I fail to appreciate why the matter should be different with corporations. Some people and companies may think that they have better things to do with their money than to pay lawyers. They may be right; they may be wrong.

[12] With respect, I do see why the ability of the corporation to afford a lawyer is relevant, and I believe I also know the rationale behind r. 15.01(2). Both relate to the fact that a corporation is a distinct entity, separate from its shareholders. This separate legal existence gives rise to two consequences that do not arise when an individual is permitted to represent himself or herself in litigation.

[13] The first is that, when a court permits an individual to represent a corporation, it is permitting that individual to represent someone other than themselves in a matter before the court. Lamond and the cases that follow it are based on the notion that the corporation is the alter ego of the individual allowed to represent it. The more closely held the corporate shares are, the more this is true. Nonetheless, in theory at least, allowing a non-lawyer to represent a litigant in matters before the court is analogous to permitting the unlicensed practice of law. This consequence was recognized by Master Graham in Robert M. Simon Construction Ltd. v. Waterloo (Regional Municipality), 2007 ONCJ 200, who wrote (at para. 29):

The Law Society Act prohibits anyone other than a “licensee” from providing legal services. The Solicitors Act states that a non-party who prosecutes or defends an action without being admitted as a solicitor is guilty of contempt of court. In exercising its discretion under rule 15.01(2), the court may not allow someone to violate a statute. Therefore, the discretion conferred upon the court by rule 15.01(2) is limited to granting leave to a corporation to be represented by an officer or director or shareholder of the corporation, and in effect represent itself, in the same manner as would an individual. Rule 15.01(2) is not intended to permit a non-lawyer who is unrelated to the corporation to act as an unlicensed lawyer for the corporation.

[14] The second consequence of the separate existence of the corporation relates not so much to the effect of allowing a non-lawyer to represent a litigant on the process of litigation but, rather, on the result. Treating a closely held corporation as merely the alter ego of its shareholder or shareholders ignores the fact that, at the end of the day, the individual or individuals can cast off their alter ego and walk away from any judgment against the corporation free from personal liability. This consequence was recognized by Twaddle J.A. in the Manitoba Court of Appeal decision of 2272539 Manitoba Ltd. v. Manitoba (Liquor Control Commission) (1996), 139 D.L.R. (4th) 9, 3 C.P.C. (4th) 137, where he wrote (at paras. 19-20):

The incorporation of a company carries with it advantages and disadvantages. Those who incorporate it limit their liability for the obligations of the company and separate the company income from their own for tax purposes. On the other hand, shareholders of a company engaged in litigation must usually arrange for legal counsel to be retained.

But for this disadvantage, corporate officers could cause impecunious corporations to litigate hopeless causes without fear of personal liability for even the other side’s costs. In this Court, meritless appeals by impoverished corporations would be encouraged. This would not serve the public interest.

[15] With respect, these two consequences – the fact that the court is allowing a non-lawyer to represent another litigant and the fact that the representative does not face the same personal financial consequences that normally inform and constrain litigation decision-making – make the company’s financial ability to hire a lawyer more important than my colleagues in Lamond and Murphy would suggest. If the company can afford to hire a licensed legal practitioner, then there is no need to ignore the corporate veil and allow the company to be represented by a non-lawyer. If the company cannot afford to hire a lawyer, or has no insurer willing to do so, then at the very least, this should inform everyone involved, including the court, when it comes to determining the access to justice and proportionality issues referred to in r. 1.04 and by my colleague Boswell J. in De La Rocha.

[16] The effect of the decision in Lamond and the cases that follow it is to make legal representation for closely held corporations the exception, and not the rule.

[17] The evidence in this case with respect to the company’s ability to afford a lawyer is vague. Mr. Lewington deposes that the corporation “found it too expensive to continue with full representation.” No details are provided. He further deposes that, unless leave is given to allow him to represent Dalew, the corporation will “effectively” be denied access to justice. Without more, this is a conclusion for which I have not been provided a foundation.

[18] Nonetheless, I am prepared to grant Mr. Lewington the order he seeks, for three reasons. First, while vague, there is at least some evidence that the corporation is unable to afford to retain a lawyer. Second, the request is unopposed. Finally, I am satisfied that the other factors referred to in Extend-A-Call weigh in favour of the order.

[19] Given that the request was not opposed, I do not believe that this is a matter in which there should be any order as to costs, nor has any request for costs been made.

M.G. Ellies R.S.J. Date: January 6, 2021