Re Favrens, Re Skanes and Re Okonkwo

April 20, 2022

Can a non-lawyer represent a creditor before the courts in an insolvency matter?

In December 2021, the Court heard three motions by MCI for orders pursuant to rule 15.01(2) of the Rules of Civil Procedure that MCI, a corporation, be granted permission to be represented by a non-lawyer, Riddell. The motions were brought in the context of the administration of consumer proposals made by the debtors in each of the three estates. MCI claimed to be a creditor in each of the estates.

Rule 15.01(2) of the Rules of Civil Procedure provides that a party to a proceeding that is a corporation shall be represented by a lawyer, except with leave of the court. According to 419212 Ontario Ltd. v. Astrochrome Crankshaft Toronto Ltd., the following factors are relevant:

  1. the internal situation of the corporation and whether the person seeking to represent the corporation in court is a senior representative of the corporation who has been duly authorized by the board of directors properly elected;

  2. the nature of the action and the issues and whether it would be seriously unfair to the opposite party to have the case presented or defended by a non-solicitor; and

  3. whether the proposed corporate representative will be able to properly carry out the duties of a litigant under the rules.

In Murphy v. Stefaniak, the Court considered whether the proposed representative had the authority to act for and bind the corporation, whether he was sufficiently knowledgeable about its affairs, whether the positions of the corporation and the representative was largely indistinguishable, whether the proposed representative is a self represented litigant in his personal capacity and whether there would be a delay by a requirement that the proposed representative find resources to retain a lawyer.

For the purpose of this decision, the Court combined the Murphy and Astrochrome factors. First, the internal situation of MCI was unclear. Riddell was not an officer of MCI, and it was unknown whether he was a shareholder or owner. There was no evidence that a meeting of the board of directors was convened to pass a resolution granting leave to Riddell to represent MCI in the bankruptcy proceedings. The Court held that Riddell failed to establish that he was duly authorized by MCI to represent its interests or that he was an alter ego of the corporation with the authority to bind it.

Second, the background to the rule 15.01 motions related to appeals by MCI from the Administrator’s disallowances of MCI’s proofs of claim and a motion by the Administrator to review the consumer proposal following deemed court approval. These underlying motions raised important legal issues with far reaching implications concerning creditor rights and entitlements. If Riddell were granted leave to represent MCI, he would serve as both advocate and witness. A lawyer is no permitted to act in such circumstances, and the Court concluded that, likewise, it could not condone a similar outcome by granting the rule 15.01 motions to a non-lawyer.

Third, the Court had serious doubts as to Riddell’s ability to perform the duties of a litigant. While Riddell held a paralegal diploma and a law degree, and was technically capable of putting forth submissions on the rule 15.01 motion, that ability alone was insufficient to grant the relief sought on the motion. The Court was troubled by Riddell’s conduct, including surreptitiously deleting the first motion record from Caselines, filing the second motion record as if it was a new motion, uploading irrelevant materials to Caselines after the hearing concluded, identifying himself as an officer and director of MCI in an affidavit when, in fact, he was neither at the time he swore such affidavit, and raising irrelevant issues that had the effect of complicating and lengthening the hearing. Moreover, at the time of the hearing of the motion, Riddell had also been subject to an injunction order prohibiting him from falsely representing himself as a lawyer or an in-house legal services provider.

Finally, Riddell took the position that MCI had not been profitable for two years and had no resources to hire a lawyer. The Court concluded that there was no such evidence on the record and inferred that there would not be a delay if MCI were required to retain a lawyer.

Accordingly, the Court dismissed the rule 15.01 motion.

Judge: Associate Justice Jean

Counsel: Howard Manis and Daniel Litsos of Manis Law LLP for the Administrator Hoyes Michelos & Associates Inc.; and Matthew Riddell for Magical Credit Inc.

By Matilda Lici