2022 QCCA 346, 2022 QCCA 346

Kaulins-Plaskacz c. Pine & Birch Ranch and Rentals Inc. 2022 QCCA 346 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-700038-219 ( 550-17-010085-171 ) MINUTES OF HEARING DATE: March 11, 2022 CORAM: THE HONOURABLE MARK SCHRAGER, J.A. LUCIE FOURNIER, J.A. GUY COURNOYER, J.A.

APPELLANT COUNSEL ILZE LAIMA KAULINS-PLASKACZ , in her capacity as executor of the Late Ihor “John” Plaskacz Mtre DANI ANN ROBICHAUD Mtre isabelle tessier ( La boîte juridique ) RESPONDENTS COUNSEL PINE & BIRCH RANCH AND RENTALS INC. 167957 CANADA INC. ( also known as southridge developments) THE PLASKACZ FAMILY TRUST Mtre FRÉDÉRIC ALLALI Mtre christian casimir ( Allali Brault ) TODD PLASKACZ UNREPRESENTED IMPLEADED PARTIES REMAX QUEBEC OUEST INC. JOHN PLASKACZ SERVICES INC. WAYNE JOHANNSEN ABSENT AND UNREPRESENTED

DESCRIPTION: Appellant's application to declare respondents' lawyers disqualified (Article 193 C.C.P .). Respondents' application for extension of delay to file their brief (Article 376 C.C.P .). Clerk at the hearing : Lesly Ramos Courtroom: Pierre-Basile-Mignault HEARING 9:30 Commencement of the hearing. Continuation of the hearing held on March 7, 2022. The parties were excused from appearing in Court. BY THE COURT : Judgment – see page 4. Conclusion of the hearing.

Lesly Ramos, Clerk at the hearing JUDGMENT [ 1 ] Appellant is the liquidator of the estate of her late husband (John Plaskacz) and in such capacity holds roughly 50% of the shares in the two corporate Respondents. [1] She has appealed from the judgment of the Superior Court, District of Gatineau, of May 18, 2021, which dismissed an oppression remedy arising from allegations of the manner in which her brother-in-law (the other 50% shareholder, and the Respondent Todd Plaskacz) has conducted and managed the affairs of the corporate Respondents.

Todd Plaskacz is apparently, de facto , or de jure sole director of each of the companies. He states that he is not in favour of Appellant becoming a director. [ 2 ] In first instance, the two corporations were represented by one and the same attorney (Mtre Anthony Robert of the firm Anthony Paul Robert). Todd Plaskacz represented himself. The Plaskacz Family Trust did not appear. [ 3 ] In appeal, Mtre Frédéric Allali of Allali Brault Inc. appeared for all Respondents. Mtre Allali and his firm have previously represented the Respondent Pine & Birch Ranch and Rentals inc. in another matter before the courts.

Appellant alleges that Mtre Allali is in conflict of interest and moves for his disqualification pursuant to

article 193 C.C.P. Appellant also concludes for the appointment of an independent director for each company whose sole task will be to appoint an independent lawyer to represent each company in the appeal and to instruct the attorneys during their mandate. [ 4 ] After service of the motion and a few days prior to the hearing, personal Respondent (Todd Plaskacz) substituted for Mtre Allali by appearing in the file for himself personally. [ 5 ] The judge dismissed the oppression remedy and states because of such dismissal, he could not make “any order regarding the repurchase of Appellant’s shares”.

He adds in the last paragraph of the judgment the following: [284] However, if the Court had granted the application, it would have ordered Southridge and P&B to buy back John’s shares evaluated by Malone at the application date, on November 22, 2017. [ 6 ] All of the oppressive conduct alleged by Appellant and dismissed by the judge is attributed to the personal Respondent.

For example, it is alleged that he has not insured or maintained immoveable property belonging to the companies, that he and his family use property of the companies for their personal benefit without paying rent, he has not caused the companies to submit audited financial

statements to the shareholders and he has authorized the payment of excessive fees from the companies to himself.

Indeed, it appears that the personal Respondent is the alter ego of the corporate Respondents. [ 7 ] Upon a reading of the judgment, it appears that the proof administered in first instance was essentially the testimony of Appellant and the personal Respondent. [ 8 ] The errors of the judge alleged in the notice of appeal essentially take up the facts of the alleged oppressive conduct and conclude, in Appellant’s own words: The Appellant finds herself clearly in an unjust situation where she is deprived of the benefits of the assets in the corporations, the potential source of income and / or a return on her late husband’s investments and is, as expressed by the courts, “locked in”. [ 9 ] In the circumstances, particularly that the personal litigants are equal shareholders and the divergent views between them in the operation of the corporate Respondents, the interest of the individuals (and particularly the personal Respondent) vis-à-vis the corporate entities are conflicted or potentially conflicted.

If nothing else, half of every dollar paid in legal fees by the companies is notionally Appellant’s money. Because of the parties’ equal shareholdings, case law concerning the absence of conflict where the majority shareholder was represented by the same attorney as the corporation, does not support Respondent’s arguments that there is no conflict of interest here.

In such cases, where the interest of the majority of shareholders aligned with the interest of the corporation, there was, understandably no conflict. [2] [ 10 ] On the question of delay to seek Mtre Allali's disqualification, it is noted that this was done rapidly. That one attorney represented the two corporate Respondents in first instance does not indicate acquiescence or tell us that there is no issue now. We are unaware of the relationship between the personal Respondent and that attorney.

As well, the pre-existing relationship of Mtre Allali with the companies and of necessity, with personal Respondent, was not a factor in first instance. Also, it appears that certain revelations at the hearing may have modified the dynamic between the parties. [ 11 ] Mtre Allali submits that the attorney of the companies will have no role other than seeking that the judgment be maintained so that there is no room to entertain any issue of conflict of interest or lack of independence on his part. We disagree.

The attorneys of the companies should seek to resolve the dispute between Appellant and personal Respondent which underscores the need for independent counsel. As the judge mentions in paragraph [284] of his judgment, there is an opening for a purchase of Appellant's shares. Such avenue itself requires independent counsel for the companies. [ 12 ] In the circumstances of this case, the same attorneys clearly cannot represent the companies and a 50% shareholder who is the manager of the companies and in fact the "active partner".

The Respondents attempt to remedy this by personal Respondent self representing may or may not be genuine. However, the fact that personal Respondent self represents does not change that he, as the director of the corporations, will instruct Mtre Allali. The dispute is between the two individuals. If not already reflected in the record, the degree of conflict between the individuals was only emphasized at the hearing by the tone and content of personal Respondent's representations. Any attorney representing the companies should be neutral as to the conflictual situation between the two shareholders.

That the mandate of the companies’ lawyers may emanate from the director as a matter of law, does not have any impact on the conflictual situation here where the personal litigants are equal shareholders and one of which is the sole director of the corporate entities. Consequently, Mtre Allali and his firm are in a conflict of interest. Moreover, given the existing relationship with personal Respondent. Mtre Allali does not have the independence to represent the corporate entities.

Accordingly, he should be disqualified from representing the corporate Respondents as well as the trust. [ 13 ] While we have no substantiation of Respondents' plea of lack of means, whatever may be the cost of having independent counsel for the two companies, it is ultimately shared equally given the shareholdings, so that any prejudice is also suffered equally.

Moreover, since personal Respondent has indicated that he will file a brief, it may be possible for the companies' attorneys to devote less time to the matter and thus, generate less fees. [ 14 ] Appellant seeks to have independent counsel appointed to represent the corporate entities. As in many similar cases, where the dispute is essentially between the two shareholders, it is questionable whether the companies actually need to be represented by attorneys in the appeal.

However, since there is no agreement between the parties and given the disqualification of Mtre Allali, the mechanism suggested by Appellant will be included in the Court’s order – i.e. in exercise of the Court’s jurisdiction under s. 241 Canada Business Corporations Act , [3] the two notaries suggested by Appellant will be named as directors for the sole and limited purpose of appointing and instructing lawyers to represent each of the companies in this case.

Should the two shareholders subsequently and unanimously resolve to vote their shares for another solution, they can renounce to this part of the judgment and put in place their solution. [ 15 ] The Respondent Trust is not represented in first instance and does not appear active nor in need of representation in this case so that Mtre Allali and his firm will be disqualified but no replacement need be named, based on the current circumstances. [ 16 ] Mtre Allali has filed a motion seeking an extension of time to file briefs for the two companies.

Given that he is disqualified, it is inappropriate to grant such an extension on his motion even if not contested. The motion will be continued before a judge of the Court on April 13, 2022, to allow time to the new attorneys to be appointed. Personal Respondent has indicated his intention to seek an extension of time as well.

FOR ALL OF THE FOREGOING REASONS, THE COURT: [ 17 ] GRANTS the motion to disqualify Mtre Frédéric Allali and the firm Allali Brault Inc., in part only; [ 18 ] TAKES cognizance that personal Respondent is self representing since February 24, 2022; [ 19 ] DECLARES that Mtre Frédéric Allali and the firm Allali Brault Inc. are in conflict of interest to represent Pine & Birch

Ranch and Rentals Inc. and 167957 Canada Inc. (also known as Southridge Developments) and DISQUALIFIES them from representing such entities in the present appeal; [ 20 ] APPOINTS Mtre Joseph Gorman as director of 167957 Canada Inc. for the sole and limited purpose and power of: (

i) appointing an independent lawyer to represent such company in the present appeal, such appointment to be made within thirty (30) days hereof; (ii) instructing such attorney; [ 21 ] APPOINTS Mtre Gilles Laflamme as director of Pine & Birch Ranch and Rentals Inc. for the sole and limited purpose and power of: (

i) appointing an independent lawyer to represent such company in the present appeal, such appointment to be made within thirty (30) days hereof; (ii) instructing such attorney; [ 22 ] DECLARES that Mtre Frédéric Allali and the firm Allali Brault Inc. are in conflict of interest to represent The Plaskacz Family Trust and DISQUALIFIES them from representing such entity in the present appeal; [ 23 ] REFERS the motion for extension of time to file a brief (demande de prolongation du délai du dépôt d'un mémoire) of Pine & Birch Ranch and Rentals Inc. and 167957 Canada Inc. (a.k.a.

Southridge Developments) to the judge of the Court sitting in such matters, at 9:30, on April 13, 2022 . [ 24 ] THE WHOLE without legal costs, given the mitigated outcome. MARK SCHRAGER, J.A. LUCIE FOURNIER, J.A. GUY COURNOYER, J.A.