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Corporations - General. T.O. Estate v. D.O.
In T.O. Estate v. D.O. (Ont CA, 2024) the Ontario Court of Appeal simply illustrates the separate identity of a corporation as opposed to it's 'owner' (shareholder/s):[40] The trial judge found the wife liable to repay, to the husband, the 2012 advance, in the amount of $40,346. Although the wife makes several arguments in support of her position that this conclusion was erroneous, I need only address one.
[41] The trial judge found that a corporation controlled by the husband, rather than the husband himself, had made the advance that gave rise to this debt. The husband’s corporation was not a party to the proceedings. There was no evidence that the original terms of this loan contemplated repayment to the husband as opposed to the corporation that made the advance, or that the husband’s corporation had ever assigned its rights to repayment to the husband.
[42] The trial judge’s only articulated basis for holding that the husband (rather than his corporation) could claim this amount was a statement in the evidence of Mr. Carusi, Ridgeway’s auditor, that in 2019 “he and his accounting firm were told by the wife that the husband’s company was no longer active and, thus, she would be paying the $40,346.00, once she receives that amount from her company, to the husband personally”. On the basis of this “admission”, the trial judge concluded that the sum “is owing to the husband’s company, and now it is owing to the husband personally.”
[43] In my view there was no legal basis to treat this statement as creating liability by the wife to the husband for this amount where none previously existed. There was no suggestion, nor any finding, that there was any consideration, flowing from the husband, to support what would essentially be a new contract replacing one creditor with another. There was no evidence that the husband’s corporation had released the wife from its ability to claim for the same debt. The “mere acknowledgement” of a debt, without consideration, “does not create a debt in the absence of a real underlying or pre-existing debt”: DeBathe et al v. T.A. Steadman Holdings Inc. et al, 2001 BCSC 1817, [2001] B.C.T.C. 1817, at para. 83; Noronha v. Siqueira, 1934 CanLII 404 (UK JCPC), [1934] 2 W.W.R. 117 (P.C.), at pp. 120-21; Northern Ontario Acceptance Co. v. Beaver Hall Investments (Ontario) Ltd., 1966 CanLII 178 (ON SC), [1967] 1 O.R. 305 (S.C.), at paras. 5-7.
[44] The trial judge erred in holding the wife liable to the husband for this amount. . Husack v. Husack
In Husack v. Husack (Ont CA, 2023) the Court of Appeal treats the interpretation of key corporate documents [here, Articles and a unanimous shareholder's agreement (USA)], as a matter of contractual interpretation (ie. Sattva):[13] Absent extricable error of law, the application judge’s interpretation of the Articles and the USA are subject to considerable appellate deference: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-55. We see no reversible error. The application judge’s interpretation reflects the clear language of the USA. Importantly, it is in keeping with the constituent purpose of the Holding Company, namely, to manage and operate Mr. Husack’s assets in accordance with his will, including the veto granted to Mrs. Husack so she could maintain control over the corporation. In this context, the waiver of any dissent rights that could prevent the orderly distribution of the estate’s assets is entirely reasonable and in keeping with the objective intention of the parties as expressed in the USA. . Durkacz v. FSD Pharma Inc.
In Durkacz v. FSD Pharma Inc. (Div Ct, 2021) the Divisional Court stated this regarding corporate governance:[22] The appellants submit this is not the end of the matter. If the reasons are sufficient there is still an error of law in the failure of the application judge to adhere to the “business judgment rule.” The “business judgment rule” is not a legal principle. It is a presumption that directors or officers act on an informed basis, in good faith, and in the best interests of the corporation and is thus rebuttable:[I]t is a precondition to the application of the [business judgment] rule that the court must determine that the directors of acted honestly, prudently, in good faith and on a reasonable belief that the transaction is in the best interest of the company.
(Corporacion Americana de Equipamientos Urbanos S.L. Olifas Marketing Group Inc. 2003 CanLII 22758 (ON SC), [2003] OJ No. 3368 at para. 13) . Bose v. Bangiya Parishad Toronto
In Bose v. Bangiya Parishad Toronto (Div Ct, 2021) the Divisional Court considered the court's jurisdiction to sort out unusual corporate board dealings, here under the Corporations Act:[17] I agree with the observations of Myers J. on the stay application in this case (Bose v. Parishad Toronto, 2019 ONSC 5625) that “[c]orporate law is practical law meant to help business people organize and conduct themselves. It is not applied based on the most technical analysis that leads to the most impractical outcomes” (at para. 29). Likewise, “[c]orporate law is also premised on the construct of shareholder or member democracy. That is, it is for the members to decide how they wish their corporation to be governed” (at para. 31).
[18] Section 297 of the Corporations Act provides the court with authority to direct that a meeting of members be held and to direct the manner in which that meeting is held. It states as follows:If for any reason it is impracticable to call a meeting of shareholders or members of the corporation in any manner in which meetings of shareholders or members may be called or to conduct the meeting in the manner prescribed by this Act, the letters patent, supplementary letters patent or by-laws, the court may, on the application of a shareholder or member who would be entitled to vote at such a meeting, order a meeting to be called, held and conducted in such manner as the court thinks fit, and any meeting called, held and conducted in accordance with such an order shall for all purposes be deemed to be a meeting of shareholders or members of the corporation duly called, held and conducted. [19] In this case it was not possible to call a meeting of the members of the Religious Corporation in accordance with the Act, by-laws or letters patent, because the Religious Corporation had not taken the formal steps necessary to enact its own by-laws or admit its own members. That does not mean, however, that the Religious Corporation did not have members. For decades it had treated the members of the Cultural Association as its members, and the members of the Cultural Association had regarded themselves as members of the Religious Corporation. Thus, the reality was that the Religious Corporation did have members (the paid-up members of the Cultural Association) and s. 297 gave the Application Judge the authority to have those members hold a meeting to determine whom they wished to run their organizations. This was both the most practical and democratic option.
[20] Section 332 of the Corporations Act also gives a court the authority to “make such order or such other order as the court thinks fit” in the face of an application by a member who is aggrieved by the failure of a director “to perform any duty imposed by this Act.” In this case, it could be argued that the New Board had acted contrary to its duties in electing itself and in denying the members of the Cultural Association access to the Tagore Centre. . Canada v. BCS Group Business Services Inc.
In Canada v. BCS Group Business Services Inc. (Fed CA, 2020) the Federal Court of Appeal considered when a corporation might be represented by a non-lawyer under Rule 17.1 of the Tax Court Rules, which read (in English):"Right to appear "
"17.1 (1) A party to a proceeding in respect of which this section applies may appear in person or be represented by counsel, but where the party wishes to be represented by counsel, only a person who is referred to in subsection (2) shall represent the party. "
"Officers of the Court "
"(2) Every person who may practise as a barrister, advocate, attorney or solicitor in any of the provinces may so practise in the Court and is an officer of the Court. "
....
"Informal Procedure "
"Right to appear "
"18.14 All parties to an appeal referred to in section 18 may appear in person or may be represented by counsel or an agent." The court, finding that a corporation had to have a lawyer, continued:[13] As for the relevant legal context, at the time section 17.1 of the Act was drafted, neither the common law nor the civil law (as codified in the Code of Civil Procedure of Quebec (CCP)) recognized that a corporation could appear "“in person”" through its officers, directors, or shareholders. The reason for this at civil law was explained as follows by Gonthier J. in National Bank of Canada v. Atomic Slipper Co., 1991 CanLII 105 (SCC), [1991] 1 S.C.R. 1059 at 1070, emphasis added:As a preliminary point, I would note that Tardi [a physical individual] and Atomic [a corporation] were not represented by counsel. Tardi is fully entitled to appear on his own behalf, but he claimed to represent Atomic. The very nature of a corporation is such that it cannot appear in person (art. 365 C.C.L.C.). It can only appear through an agent. In Quebec, only lawyers are entitled to represent a party before the courts (art. 61 C.C.P. and s. 128 of the Act respecting the Barreau du Québec, R.S.Q., c. B-1) and it follows that a corporation can only appear in court through counsel (Thomassin v. General Finance Corp., [1953] Que. Q.B. 375). [14] In Trifidus Inc. v. Samgo Innovations Inc. et al., 2011 NBCA 59 at paragraph 20, Justice Quigg uses similar words to describe the state of the common law. She wrote that "“[u]nlike individuals, who are legally and logically capable of self-representation, corporations must inevitably rely on representation by individual agent. Even if the agent is the corporate director and sole shareholder, he or she is still considered to be legally distinct from the corporation and, therefore, a third party to it.”"
[15] It is useful in such circumstances to put GP Rule 30(2) in context and to consider that it is not unique in its approach. Courts, including statutory courts like the Federal Courts, have an implicit power or discretion to control their own process, unless limited by specific legislation (see for example article 87 of Quebec’s CCP, which lists who must be represented by counsel). This is why for many years, many courts have adopted rules of procedure allowing them to grant leave to corporations to be represented by physical individuals other than counsel in special circumstances. This has become particularly important given the increase in the legal costs of litigation and the need to foster access to justice. This approach, based on a by leave process, enables the court to balance this need with the need for efficiency in the administration of justice. In none of those cases did a statute give a corporation a statutory right to appear "“in person”". The granting of leave is a privilege arising from the court’s discretion to control its own process. Therefore, this discretion can be taken away by an express clause in the legislation constituting the court when Parliament expressly deals with representation in the courtroom. The case contains a (perhaps over-prolonged) discussion of corporations as a legal entity and their legal representation, it concludes that corporations have a separate legal existence from their directors and shareholders and that the quoted Tax Court Rules do not tolerate legal representation by such as agents:[64] I conclude from all of the above that on the proper statutory interpretation of section 17.1 of the Act, the TCC could not find that Mr. Gagnon personified BCS and that he was exercising BCS’s right to appear "“in person”". As Mr. Gagnon is not a lawyer, he could not act as counsel for BCS. The TCC could not grant leave to Mr. Gagnon to act as BCS’s agent in the appeal before it.
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