CITATION: Tash Benson Group Inc. v. Back-Bone Gear Inc. et al., 2021 ONSC 7667
COURT FILE NO.: CV-19-95
DATE: 2021/11/25
SUPERIOR COURT OF JUSTICE – ONTARIO
(Proceeding commenced at Lindsay, Ontario)
RE: TASH BENSON GROUP INC.
Plaintiff
-and-
BACK-BONE GEAR INC., XYZ RGB INC., and HELMUT KUNGL
Defendants
BEFORE: Madam Justice S. Corthorn
COUNSEL: James P. McGlone, self-represented
No one appearing for the plaintiff corporation
Anna Katyk, for the defendants
HEARD: October 27, 2021
ENDORSEMENT
Introduction
[1] In this action, the plaintiff corporation (“Tash Benson”) claims damages in excess of $300,000 based, in part, on an alleged breach of an agreement for services between Tash Benson and the defendant corporation, Back-Bone Gear Inc. (“Back-Bone”). After the statement of claim was served on the defendants, they were noted in default.
[2] The parties were before the court in December 2019. They negotiated the terms of a consent order with respect to a motion by the defendants to set aside the noting in default. Tash Benson was not represented by counsel for that appearance. James P. McGlone, who asserted that he is the sole director of Tash Benson, was granted leave to represent the plaintiff corporation for the limited purpose of that appearance.
[3] Mr. McGlone informed the court and counsel for the defendants that it was his intention to seek leave to represent Tash Benson in the action in its entirety. A detailed timetable was set for steps to be taken in order for Mr. McGlone’s motion to be heard no later than April 30, 2020.
[4] Mr. McGlone met that deadline by delivering materials for a motion returnable on April 6, 2020. Covid-19 intervened and the motion was adjourned. The motion was ultimately heard in late October 2021.
Background
[5] Mr. McGlone prepared the statement of claim. That document is 219 pages in total. The substantive allegations are set out in 113 paragraphs over 39 pages. The remaining pages include various documents attached as Schedules.
[6] After being served with the statement of claim, the defendants (a) served a notice of intent to defend, and (b) informed Tash Benson that they intend to bring a motion to strike the statement of claim. Despite being informed of the defendants’ intention in that regard, Tash Benson noted the defendants in default. That step was taken by Mr. McGlone on Tash Benson’s behalf.
[7] The defendants served a motion record for relief that included an order setting aside the noting in default. The relief sought also included an order striking the statement of claim or, in the alternative, for security for costs.
[8] On the return of the defendants’ motion in December 2019, and specifically because Tash Benson was not represented by counsel, the only relief that could be addressed was the request to have the noting in default set aside. The balance of the defendants’ motion was adjourned sine die. If the defendants intend to proceed with the balance of their motion, they are to do so after the issue of representation of Tash Benson is addressed.
[9] Mr. McGlone prepared the materials for the motion now before the court. The motion record is 296 pages. It includes the following documents:
• A two-page document titled, “Nature of the motion by the plaintiff”;
• A copy of the court’s endorsement dated December 5, 2019;
• A copy of Mr. McGlone’s notice of motion dated January 13, 2020; and
• Copies of the factum upon which Mr. McGlone relies with respect to this motion, the statement of claim, the defendants’ amended notice of motion for the motion heard in part in December 2019, and the parties’ respective facta delivered for the December 2019 motion.
[10] Mr. McGlone’s motion record does not include any affidavit evidence. The lack of evidence was addressed by having Mr. McGlone give oral evidence on the return of his motion. He was offered, and declined, an adjournment of the motion to permit him to (a) seek the advice of counsel with respect to evidence required in support of the motion, and (b) prepare to give oral evidence. Mr. McGlone wished to proceed with the motion and give oral evidence.
[11] In his testimony, Mr. McGlone emphasized his work experience. That experience is set out in Schedule 1 to the statement of claim, in a document titled “McGlone Background”. Mr. McGlone gave evidence summarizing his 30 years of experience in “executive management and advisory services as a C.A., C.P.A. in a wide range of businesses including technology companies, public companies, private organizations, crown corporations, large and small, new and reorganized”: motion record, at p. 88.
[12] Positions previously held by Mr. McGlone include those of Chief Financial Officer of two Crown Corporations, an institutional investment bank, and a merchant bank. He co-founded companies in the fields of geophysics, 3D image scanning technologies, and small real estate syndications. He was a Director of the Expo 86 Corporation – with responsibilities for treasury, corporate budgets, and financial management reporting. He also held the position of C.A., C.P.A. with a large accounting firm in Canada.
[13] Mr. McGlone is aware that one of the criticisms from the defendants regarding the statement of claim is that it is “long and repetitive”. He acknowledges that the documents he has prepared to date in this action are both long and repetitive. He attributes the length and content of the documents to a writing style which he developed while fulfilling the various roles described above. In the areas in which he works, Mr. McGlone relies on that writing style for ease of reference for the reader.
[14] Mr. McGlone’s evidence is that he can, when preparing documents for the purpose of this action, make the necessary adjustments and conform to the requirements for litigation documents. He testified that he is capable of familiarizing himself with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”).
[15] Mr. McGlone’s evidence is that he is the sole director and shareholder of Tash Benson. The motion record does not include any documents related to the corporate structure of Tash Benson. Mr. McGlone did not have a copy of the Corporate Profile for Tash Benson available when testifying.
[16] While giving evidence, Mr. McGlone was again offered the opportunity to adjourn the motion to permit him to gather additional documents and have them available for the court when the motion continued. He again declined the offer of an adjournment and repeated his preference to proceed with the motion.
[17] With respect to Tash Benson’s financial situation, Mr. McGlone’s evidence is that the corporation is no longer in business; it does not have any money with which to pay for a lawyer. From 2004 to 2014, Tash Benson’s sole source of income was the money it earned through its contract with Back-Bone. Mr. McGlone testified that as a result of a unilateral decision of the defendant, Helmut Kungl, Back-Bone has not paid Tash Benson for any of the work done pursuant to the agreement that is the subject of this action.
[18] Mr. McGlone testified that he had devoted himself (and Tash Benson) to Back-Bone for years, without compensation. Mr. McGlone’s evidence is that as a result of Tash Benson not being paid pursuant to its contract with Back-Bone, he had to sell his family home.
[19] The motion record does not include any documents that would assist the court in assessing Tash Benson’s financial position at this time or during the years in which it was operating. Nor does the motion record include any documents that would assist the court in assessing Mr. McGlone’s personal financial situation.
[20] Mr. McGlone testified that both his son and daughter are ten-percent shareholders in Back-Bone. Mr. McGlone understands that Back-Bone was recently said by Mr. Kungl to be valued at an amount in excess of $6,000,000. Mr. McGlone’s evidence is that his son and daughter are unable to liquidate their shareholdings in Back-Bone because of Mr. Kungl’s unilateral control with respect to the liquidation process. Mr. McGlone testified that, without the benefit of liquidating their shareholdings in Back-Bone, his children are not in a position to assist Tash Benson with paying a lawyer to represent the corporation in this action.
[21] Counsel for the defendants chose not to cross-examine Mr. McGlone.
The Issue
[22] The issue to be determined is whether Mr. McGlone has met the onus he bears to satisfy the court that he is entitled to leave to represent Tash Benson in this action.
The Positions of the Parties
[23] Mr. McGlone submits that he is in the best position possible of anyone to advance Tash Benson’s claims. He has the requisite knowledge of the facts and documents in support of the claims made. The persistence he has shown to date is said by Mr. McGlone to be a reflection of his desire to achieve a just and fair result for Tash Benson.
[24] Mr. McGlone submits that he is not confused about what will be required of him. To the extent required, he will learn the Rules and conform to the expectations and practices with respect to litigation documents.
[25] The defendants submit that the evidence falls short of satisfying the criteria for Mr. McGlone to be entitled to leave to represent Tash Benson. The defendants rely on the criteria developed in the case law – criteria which are discussed in greater detail below. The defendants ask for Mr. McGlone’s motion to be dismissed.
The Law
[26] The representation of parties to an action is governed by r. 15. Representation of a corporation is addressed in r. 15.01(2), which provides that “[a] party to a proceeding that is a corporation shall be represented by a lawyer, except with leave of the court.”
[27] The court must also consider the general principles set out in r. 1. First, r. 1.04 requires that the Rules be construed liberally in order to secure the just, most expeditious, and least expensive determination of the matter. Second, pursuant to r. 1.1, the court is required to make orders and give directions that are proportionate to the importance and complexity of the issues.
[28] Rule 15.01(2) does not set out the factors to be considered on a motion of this kind. Those factors stem from the case law.
[29] In Ward v. 1121720 Ontario Ltd. o/a Havcare Investments Inc., 2015 ONSC 3873, at paras. 3 and 4, Carole J. Brown J. listed the following factors to be considered on a motion of this kind:
• The internal situation of the corporation – is the person seeking leave to represent the corporation a senior representative of the corporation who has been duly authorized by a duly elected board of directors?
• Will the proposed corporate representative be able to carry out the duties of a litigant under the Rules?
• What is the nature of the action and of the issues? Will it be seriously unfair to the opposite party for the case to be presented or defended by a non-lawyer?
• Are the interests of shareholders, officers, directors, employees, creditors and other potential stakeholders adequately protected if leave is granted?
• Will the proposed representative be reasonably capable of comprehending the issues and articulating the case on behalf of the corporation?
• Is the corporation financially capable of retaining counsel?
[30] The first three factors are from the decision of Master Sandler in 419212 Ontario Ltd. v. Astrochrome Crankshaft Toronto Ltd. (1991), 1991 CanLII 7163 (ON SC), 3 O.R. (3d) 116, at pp. 120-121. (“Astrochrome”). In neither Ward nor Astrochrome is the court mandated to consider all factors in all cases. I find that there is, in any event, a degree of overlap between the six factors listed above.
[31] There are competing lines of cases as to whether the financial position of a corporation is a relevant factor when the subject corporation is a closely held company or effectively a one-person operation:
• In the following decisions, the court held that the financial position of such a corporation is not necessarily relevant: Lamond v. Smith, 2004 CanLII 6218 (Ont. S.C.) at para. 13; Mirashrafi v. Circuit Center, 2007 CarswellOnt 3839 (S.C.), at para. 14; Extend-A-Call Inc. v. Dmitri Granovski et al., 2009 CanLII 33047 (Ont. S.C.); De La Rocha v. Markham Endoscopy Diagnostics Inc., 2010 ONSC 5100; and Murphy v. Stefaniak, 2014 ONSC 4396, at para. 10; and
• By contrast, in Ward and Astrochrome, the court held that the financial position is a relevant factor for any corporation, even a closely-held or a one-person corporation: see Ward, at para. 5; Astrochrome at p. 118.
[32] The decisions cited in the preceding paragraph are not intended as an exhaustive list of the decisions relevant to whether the financial position of the corporation is (or is not) a factor to be considered on a motion of the kind now before the court.
[33] Turning to a different factor, I note that there is no consensus in the decisions cited above as to whether protecting a company from unauthorized representation does not apply where the principal of a one-person company seeks leave to represent the company: see e.g. Lamond, at para. 8.
Analysis
a) The Requirements of a Litigant
[34] Mr. McGlone is an experienced business person and has enjoyed much success in his endeavours over the years. The document titled, “McGlone Background” is well written and efficiently speaks to that experience and success. I found Mr. McGlone to be articulate when giving evidence.
[35] I find, however, that Mr. McGlone has shortcomings as a litigant. Mr. McGlone’s shortcomings are demonstrated by the deficiencies in the materials delivered and in the evidence presented on this motion. Those deficiencies exist despite the fact that Mr. McGlone has had since December 2019, when this matter was first before the court, to review the relevant Rules, seek advice as might be required, and prepare the motion materials.
[36] Another example of Mr. McGlone’s shortcomings as a litigant is the statement of claim which he prepared. The substantive text runs for 39 pages and 113 paragraphs. Hundreds of pages of schedules are attached to the substantive portion of the pleading.
[37] The inclusion of hundreds of pages of irrelevant schedules is indicative of a pleading that does not meet the requirements of the Rules. I do not intend to deal with the merits of the defendants’ intended motion to strike the pleading. I point out, however, that a 39-page, 113-paragraph statement of claim is not the norm, other than perhaps in the most complex of litigation. The issues in this action are not so complex as to warrant a pleading of that magnitude.
[38] As a final example of Mr. McGlone’s shortcomings as a litigant, I point to the factum filed in support of this motion. The factum, although well-written, is long and repetitive. The primary problem with Mr. McGlone’s factum is that it is replete with what might otherwise be evidence if presented in affidavit form.
[39] The court does not expect that a layperson will prepare documents with the same degree of skill as would a lawyer. A self-represented party or a corporation represented by a layperson must, however, still make an effort to comply with the Rules and with the norms and practices with respect to litigation documents. If Mr. McGlone is granted leave to represent Tash Benson, he must make a greater effort to prepare documents in accordance with the norms and practices for civil litigation in this province.
[40] In Lamond, Quinn J. addressed the factor, from the 1991 decision of Master Sandler in Astrochrome, regarding the proposed representative’s ability to fulfill their duties as a litigant under the Rules. At para. 11, Quinn J. said, “In an era when self-represented litigants abound it does not make sense to worry whether [the proposed corporate representative] is capable of carrying out the responsibilities of a litigant. Absent proven mental incompetence, [the proposed corporate representative’s] intelligence and litigious capabilities, in my view, are quite irrelevant.”
[41] The year in which Quinn J. made that comment was 2004 – almost 20 years ago. There are even more self-represented litigants appearing before the court now than there were 20 years ago.
[42] While I would not go as far as Quinn J. and say that capabilities as a litigant are “quite irrelevant”, I find that Mr. McGlone’s shortcomings as a litigant are not sufficient to disqualify him from representing Tash Benson.
b) Self-represented Litigants, the Costs of Litigation, and Unfairness to the Opposing Party
[43] The involvement of self-represented parties in litigation was also the subject of comment by Quinn J. at para. 10 of Lamond:
Other cases have expressed concern about whether granting leave under [r.] 15.01(2) would be unfair to the other party or parties who then would be opposed by a non-solicitor. With respect, I do not consider this to be a material consideration. Invariably, when one of the litigants in a civil action is self-represented there is a substantially increased burden not only upon the remaining parties but upon the court. This is now a fact of life.
[44] At para. 14 of his 2014 decision in DM Urban-Scape Property Developments Ltd. v. Body Blitz Spa East Inc. et al, 2014 ONSC 1616, Master Albert commented that “[a] self-represented litigant who is incapable of navigating the complex waters of a civil lawsuit inevitably drives up the cost of litigation to the opposite party.”
[45] The defendants rely on several examples of Mr. McGlone’s conduct in support of their submission that they have already incurred, and expect to continue to incur, higher costs than might be incurred if Tash Benson were represented by counsel. First, there is Mr. McGlone’s decision to note the defendants in default. The norms and practices around noting in default do not appear to have been followed by Mr. McGlone. That said, not every lawyer follows those norms and practices; in any event, a lawyer takes instruction from their client.
[46] Second, there is Mr. McGlone’s response to the motion for an order setting aside the noting in default. He could have consented to the relief sought, but chose not to do so.
[47] Third, is the expectation that the defendants will incur costs for a motion to address the quality of Tash Benson’s pleading. Motions to strike are not restricted to pleadings prepared by self-represented litigants. Such motions are brought even when the party whose pleading is to be scrutinized is represented by counsel.
[48] Fourth, the defendants highlight the detail required in responding to Mr. McGlone’s motion materials. The defendants cite as an example of that detail the chart included as a schedule to their factum. The chart sets out what the defendants submit are the issues with respect to each of the 46 paragraphs in Mr. McGlone’s factum. A chart of that kind is certainly helpful. The issues raised in the chart could, however, also have been summarized in point form in a paragraph in the body of the factum.
[49] I am not satisfied that Mr. McGlone’s conduct of the litigation to date supports a finding that it would be unfair to the defendants to permit him to represent Tash Benson in the action.
c) The Type of Corporation
[50] There is a lack of evidence before the court to support a finding that Tash Benson is the type of corporation envisaged, for example by Quinn J. in Lamond, for which it is reasonable to grant leave to a non-lawyer to represent the corporation. The types of corporations discussed by Quinn J. include a closely held corporation or a one-person corporation.
[51] Mr. McGlone’s evidence is that he is the sole director of, sole officer of, and one of four shareholders in Tash Benson; the other three shareholders are his son, daughter, and sister. The motion record does not include any documents with respect to the corporate structure.
[52] At para. 2 of the factum prepared by Mr. McGlone, he states that he has been the sole officer and director of Tash Benson since 2015. In the same paragraph, Mr. McGlone states that his son and daughter are shareholders of Tash Benson. Mr. McGlone also refers in that paragraph to his sister, but does not therein identify what role, if any, she has in Tash Benson.
[53] In the circumstances, I am not critical of either Mr. McGlone or the defendants for not bringing to the court’s attention the competing lines of cases discussed in paragraph 31, above. The defendants responded to the motion on the basis that Mr. McGlone did not provide the court with evidence to support the relief requested. Had there been evidence before the court of Tash Benson’s corporate structure, as a closely held or one-person corporation, then both Mr. McGlone and counsel for the defendants would have had an obligation to bring the competing lines of cases to the court’s attention.
[54] Taking into consideration the general principles established in rr. 1.04 and 1.1, I find that the just outcome on this motion is to dismiss it, with leave to Mr. McGlone to bring a motion for the same relief, but on a further and better record. Boswell J. made a similar order in De La Rocha, at para. 8.
[55] The further and better record shall include an affidavit in which Mr. McGlone or another individual, in a position to do so, provides the requisite evidence. Documents relevant to the factors to be considered by the court shall be attached as exhibits (as long as the affiant is in a position to identify the exhibits). For example, the court expects that the affidavit will include, as an exhibit, a copy of the Corporate Profile and any other documents Mr. McGlone determines are relevant to establish Tash Benson’s internal structure.
d) The Corporation’s Financial Situation
[56] Whether or not Tash Benson’s financial situation is relevant will depend on (a) the type of corporation it is (closely held, a one-person corporation, or another type of corporation), and (b) which of the competing lines of cases set out in para. 31, above, the court decides to follow.
[57] If Mr. McGlone brings the motion again, the motion record must include evidence of Tash Benson’s financial situation. Mr. McGlone must also consider whether the motion record should include evidence of his financial situation. The latter evidence may be required to assist the court in determining whether Tash Benson is in a position to borrow money from Mr. McGlone to pay for a lawyer: see DM Urban-Scape, at para. 10.
[58] At present, the only evidence before the court as to Tash Benson’s financial situation are Mr. McGlone’s assertions that Tash Benson does not have the financial resources with which to retain counsel. Bald statements or assertions of that kind are insufficient to support a finding that Tash Benson is unable financially to retain counsel: see DM Urban-Scape, at paras. 8-11.
[59] As noted by Carole J. Brown J. at para. 10 of Ward, the lack of documentary evidence to support a finding that the corporation is financially unable to retain counsel “can be taken as an assumption that the [c]orporation indeed has the financial means to retain counsel.” In DM Urban-Scape, at paras. 9-11, Master Albert concluded that the lack of relevant financial evidence and, in that case, a refusal to produce copies of the relevant documents, were sufficient to support an inference that the plaintiff corporation had the funds required to retain counsel.
[60] In summary, the lack of evidence with respect to Tash Benson’s and Mr. McGlone’s personal financial circumstances falls short of establishing that Tash Benson is unable to pay for counsel to represent it in this action. That lack of evidence could support an inference that Tash Benson has the financial means with which to retain counsel. However, because the motion is dismissed, with leave to Mr. McGlone to bring the motion on a better record, I make no findings at this time with respect to Tash Benson’s financial situation.
Disposition
[61] I make the following order:
The motion for leave to represent the plaintiff corporation in this action is dismissed.
James P. McGlone is granted leave to bring the motion again on a further and better record.
If James P. McGlone intends to bring the motion again, on a further and better record, he shall, no later than January 31, 2022, serve and file his motion record. The deadlines for service and filing of the other documents on the motion, whether from Tash Benson or the defendants, shall be in accordance with the timelines established in the Rules.
[62] I remain seized of this matter for the purpose of another motion, if pursued, by Mr. McGlone for an order granting him leave to represent Tash Benson in this action.
Costs
[63] If Mr. McGlone brings another motion, I shall address costs of this motion at the same time that I address costs of the second version of it.
[64] If Mr. McGlone does not bring another motion, then the parties shall make written costs submissions as follows:
a) The parties’ respective primary submissions shall be limited to a maximum of six pages (excluding the bill of costs). The defendants’ reply submissions, if any, shall be limited to a maximum of two pages;
b) Written submissions shall comply with r. 4 of the Rules;
c) Copies of any case law or other authorities relied on shall be provided with the submissions and shall comply with r. 4 of the Rules with respect to font size;
d) Submissions, including copies of case law or other authorities, shall be filed with the court electronically in accordance with the most recent notice to the profession in that regard;
e) The parties shall deliver their respective written submissions by 4:00 p.m. on February 15, 2022; and
f) If either party wishes to deliver reply submissions, they shall do so by 4:00 p.m. on February 28, 2022.
[65] If no submissions are delivered pursuant to subparagraph (e) above, there will be no further order with respect to the costs of this motion.
Madam Justice S. Corthorn
Date: November 25, 2021
COURT FILE NO.: CV-19-95
DATE: 2021/11/25
ONTARIO
SUPERIOR COURT OF JUSTICE
(Proceeding commenced at Lindsay, Ontario)
RE: TASH BENSON GROUP INC.
Plaintiff
-and-
BACK-BONE GEAR INC., XYZ RGB INC., and HELMUT KUNGL
Defendants
BEFORE: Madam Justice S. Corthorn
COUNSEL: James P. McGlone self-represented
No one appearing for the plaintiff corporation
Anna Katyk, for the Defendants
ENDORSEMENT
Released: November 25, 2021