Liberty Mutual et al v. Donatelli et al, 2010 ONSC 6318
CITATION: Liberty Mutual et al v. Donatelli et al, 2010 ONSC 6318
DIVISIONAL COURT FILE NO.: DC-09-130, DC-09-131, DC-09-178-ML
DATE: 2010-11-19
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Matlow, Heeney and Mackinnon JJ.
BETWEEN:
LIBERTY MUTUAL INSURANCE COMPANY and LIBERTY INSURANCE COMPANY OF CANADA Plaintiffs/Respondents
– and –
ROSE VENNERI DONATELLI, MICHAEL VENNERI, PROFESSIONAL COUNSELLING SERVICES and COMPREHENSIVE HEALTH CLINIC INC. Defendants/Appellants
COUNSEL:
Dwain Burns, for the Plaintiffs/Respondents
Timothy Pedwell, for the Appellant/Respondent Comprehensive Health Clinic Inc. Rose Venneri Donatelli, self-represented Michael Venneri, self-represented
HEARD: November 15, 2010 at Hamilton
Reasons for Decision
HEENEY J.:
[1] This is an appeal of an interlocutory order of Matheson J. dated August 11, 2008. Leave to appeal was granted by Hambly J. on May 8, 2009, with respect to that portion of the order that imposed an order for security for costs on the appellants. The reasons of Hambly J. identified a discrete legal issue as to whether there is a conflict between the provisions of Rule 56.01(1) and s. 12 of the Libel and Slander Act, R.S.O. 1990, c. L.12 (“the Act”), both of which provide a mechanism for ordering security for costs.
[2] The appellants did not, however, confine their appeal to that issue. In addition to appealing the security for costs order of Matheson J., they also sought to appeal aspects of the order of Hambly J., where he denied leave to appeal other portions of the order of Matheson J., and where he dealt with several motions sitting as the motions judge of first instance.
[3] There were, in all, five separate matters before Hambly J.:
a) a motion for an extension of time to seek leave to appeal an interlocutory Order made by Justice Quinn on July 19, 2007, ordering the defendants to pay costs in the amount of $17,400;
b) a motion for leave to appeal an interlocutory Order made by Justice Matheson on August 11, 2008, ordering the defendants to answer undertakings given on examination for discovery, ordering the defendants to pay costs (ordered by Justice Quinn) and ordering the defendants to post security for costs ;
c) a motion for an order striking the plaintiffs’ Statement of Claim, or in the alternative, to provide particulars;
d) a motion for an order prohibiting the plaintiffs from bringing further motions; and
e) a motion for an order verifying the transcript of the examination for discovery.
[4] As to matters a), c), d) and e), each motion was dismissed by Hambly J., sitting as a motions judge of first instance. No leave to appeal those orders has been granted by a judge of the Superior Court of Justice as required by s. 19(1)(b) of the Courts of Justice Act and rule 62.02. A motion for leave to appeal, brought by the appellants, had been scheduled to be heard on December 23, 2009. The appellants moved for an adjournment of that motion on December 17, 2009. After their request for an adjournment was denied, they filed a Notice of Withdrawal dated December 21, 2009, withdrawing their motions for leave to appeal. Absent leave, those appeals are not properly before this court, and are dismissed.
[5] As to matter b), leave to appeal the order to post security for costs was granted, and we will deal with that in these reasons. Leave to appeal was denied by Hambly J. with respect to the other two orders made by Matheson J., in which he ordered the appellants to answer undertakings and pay costs. No appeal lies from an order that denies leave to appeal: The Chesapeake and Ohio Railway Company v. Ball, 1953 126 (ON CA), [1953] O.R. 877 (C.A.). Accordingly, those appeals are dismissed as well.
[6] That leaves one matter to deal with that is properly before us, which is the appeal of the security for costs order of Matheson J. dated August 11, 2008.
[7] By way of background, the plaintiffs (respondents), Liberty Mutual Insurance Company and Liberty Insurance Company of Canada (collectively “Liberty”), provide insurance to owners of automobiles. Rose Venneri Donatelli (“Donatelli”) had a business as a counselor. She shared office space with her son, Michael Venneri (“Venneri”), who is a chiropractor in St. Catharines, Ontario. He carries on his chiropractic practice through his company, Comprehensive Health Claims Inc. (“Comprehensive”). On October 6, 2001, Donatelli was charged by the police with fraud. It was alleged that she held herself out as a psychologist, which she was not. On October 6, 2001, a newspaper in St. Catharines published the fact that she faced criminal charges and described the allegations against her. Liberty did an investigation in which it acquired consents from their insureds, whom Donatelli had treated, to release their treatment records to the police.
[8] As a result of this information, a police officer swore an information containing 3 additional charges which alleged that Donatelli, between November 1, 1998, and December 31, 2000, defrauded Liberty of an amount exceeding $5000. The allegation was that she did not have a PhD as a psychologist and yet billed for her services as such. Ultimately, the Crown withdrew all of the criminal charges against Donatelli sometime in 2003.
[9] On September 16, 2003, Liberty caused a Statement of Claim to be issued against Donatelli, Venneri and Comprehensive, in which Liberty claimed reimbursement of $31,689, being the amount that Liberty had paid Donatelli for treatment of their insureds.
[10] On August 3, 2004 the defendants filed an Amended Statement of Defence and Counterclaim, and claimed damages of $12.5 million against the plaintiffs for defamation.
[11] The plaintiffs brought a motion for an order that the defendants provide particulars, first returnable on January 6, 2005. After several adjournments, the motion came before Walters J. for argument on April 22, 2005. By that time, Venneri and Comprehensive had retained Mr. T. Pedwell. Donatelli represented herself. Justice Walters granted the plaintiffs the particulars which they sought, to be supplied by the defendants by May 20, 2005.
[12] Both sides brought several motions, and a decision on the costs of these motions remained outstanding. The motions eventually came before Quinn J. on July 18, 2007. Justice Quinn fixed the costs of the plaintiffs on a partial indemnity scale at $17,400 against the defendants jointly and severally. He fixed the costs of the proceedings before him on July 18, 2007, payable by the defendants to the plaintiffs in the amount of $1000 plus GST.
[13] The defendants did not pay any of the costs that had been ordered against them. Donatelli also did not answer undertakings that she had given on her examination for discovery on March 9, 2007, at which she was represented by counsel, Roger Yachetti. The plaintiffs brought a motion first returnable on February 28, 2008, for an order striking the Statement of Defence and Counterclaim of the defendants or, in the alternative, for an order that Donatelli answer her undertakings within 30 days, failing which the plaintiffs could move without notice to strike the Statement of Defence and Counterclaim. The plaintiffs also sought security for costs against the defendants in relation to their counterclaim.
[14] The motion came before Matheson J. for argument on July 8, 2008.
[15] In his written decision dated August 11, 2008, Matheson J. noted that the motion for security for costs had been brought pursuant to rule 56.01(1) of the Rules of Civil Procedure, and not pursuant to the Act. Two subsections under rule 56.01(1) were expressly considered, and they read as follows:
The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,
(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
[16] Matheson J. considered whether the defendants had satisfied the onus of proving they were impecunious, and concluded that they had not. He was satisfied that they were not destitute and were able, if ordered, to put up security for costs. He also considered whether the counterclaim was vexatious, and concluded that it was premature to state that there were no grounds to the counterclaim.
[17] He did, however, order security for costs pursuant to sub-rule (c). At para. 64 of his decision, he said the following:
This matter has been before the courts for a long period of time. Venneri has failed to answer valid undertakings given by her then lawyer on March 9, 2007. All Defendants have failed to pay costs as ordered by the court. They have failed to bring a motion as directed by Justice Arrell in September 2007. The court must protect its process.
[18] He ordered:
that the defendants shall pay all costs presently outstanding, in the amount of $19,710, within 30 days, failing which their Statement of Defence and Counterclaim will be struck;
that the defendants file with the court the sum of $100,000 as security for costs, within 90 days, or their Statement of Defence and Counterclaim will be struck; and,
that the defendants pay costs of the motion fixed at $4,000.
[19] As already noted, it is only the order requiring security for costs that is properly before this court on this appeal. Before analyzing that issue, some comment is in order with respect to the manner in which this appeal has been conducted.
[20] The material filed by the appellants on this appeal is grossly deficient. Donatelli filed a document that is titled “Appeal Book and Compendium”, but in fact it contains none of the documents that are required by rule 61.10. We had to search through documents filed by the respondents to find a copy of her Notice of Appeal. No copy of the order of Matheson J. as issued and entered has been filed, and we have our doubts that it has ever been taken out. The factum of Donatelli is rambling, unfocussed and repetitive, and bears no resemblance to the document mandated by rule 61.11. No Exhibit Book has been filed by any of the appellants, as required by rule 61.10.1, so that we do not have any of the affidavits that were before Matheson J., which formed the factual basis for the order that he made, and which are necessary for full appellate review of the order.
[21] Vanneri filed no documents at all, and he appeared on the appeal as a self-represented appellant. His choice to be self-represented is puzzling, since he is the principal shareholder of Comprehensive, which does have counsel, as is required by the Rules for a corporate defendant. We are aware of no conflict in their positions which would have precluded Mr. Pedwell from representing all of the appellants.
[22] While some latitude is appropriate where litigants are self-represented, the deficiencies in the required documentation here go far beyond what can be tolerated. Donatelli, in particular, quoted at length from the Rules of Civil Procedure during argument, so she clearly knows that the Rules exist, and has no excuse for not following them. Comprehensive does have counsel, yet still failed to comply with the Rules.
[23] This is the third occasion on which this appeal has been before a panel of the Divisional Court, and it was still not properly prepared to be heard. This would have been an appropriate case in which to dismiss the appeal outright on the grounds that it had not been properly perfected. In lieu of that, we indicated to the parties that we were prepared to restrict this appeal to a consideration of the one pure question of law that was identified by Hambly J. (since a determination of that question would not depend on the evidentiary record in the court below), and by dismissing the balance of the appeal. All parties agreed to proceed on that basis.
[24] Despite that limitation, the appellants also attempted to argue that Matheson J. had erred in holding that costs orders were outstanding, given that a Notice of Appeal from one of the costs orders had been filed (albeit with the wrong court), which in their submission meant that the costs order was stayed. They also submitted that Matheson J. erred by referring to an affidavit that had been admittedly withdrawn by the plaintiffs at the opening of the motion.
[25] In our view, these submissions have no merit. As to the costs issue, an appeal of an order for costs requires leave, pursuant to s. 133(b) of the Courts of Justice Act. Pursuant to rule 62.02(8), a Notice of Appeal is to be delivered within 7 days after leave is granted. Leave to appeal the costs order in question has never been granted, and it follows that a Notice of Appeal has never been properly filed, and the costs order has never been stayed.
[26] As to the improper reference to the affidavit, it was referred to by Matheson J. in the course of determining that the parties were not impecunious. This error is beyond the scope of the appeal as we agreed to hear it, and is immaterial to the discrete legal issue that is before us.
[27] Turning, then, to the legal issue at hand, it can be stated as follows: is there a conflict between the provisions of rule 56.01(1)(c) and s. 12 of the Act? If there is, then the provisions of the Act must prevail, since rule 1.02(1)3 states that the rules “do not apply if a statute provides for a different procedure”.
[28] The relevant part of the applicable rule is reproduced above at para. 15. Section 12 of the Act reads as follows:
- (1) In an action for libel in a newspaper or in a broadcast, the defendant may, at any time after the delivery of the statement of claim or the expiry of the time within which it should have been delivered, apply to the court for security for costs, upon notice and an affidavit by the defendant or the defendant’s agent showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements complained of were made in good faith, or that the grounds of action are trivial or frivolous, and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, and the order is a stay of proceedings until the security is given.
(2) Where the alleged libel involves a criminal charge, the defendant is not entitled to security for costs under this section unless the defendant satisfies the court that the action is trivial or frivolous, or that the circumstances under which section 5 entitle the defendant at the trial to have the damages restricted to actual damages appear to exist, except the circumstances that the matter complained of involves a criminal charge.
[29] To avoid confusion in the discussion that follows, one point of terminology must be clarified. This section refers to a defendant applying to obtain security for costs against a plaintiff. Rule 56.01 is couched in similar terms. In the case at bar, it was the plaintiffs who obtained the order for security for costs against the defendants, but they did so in their capacity as defendants-by-counterclaim. The order was made against the defendants in their capacity as plaintiffs-by-counterclaim. That point must be kept in mind in reading these provisions.
[30] The Divisional Court in Khan v. Metroland, 2003 49412 (ON SCDC), [2003] O.J. No. 4261 (Div. Ct.), held that there was a conflict between s. 12 and rule 56.01, and that the Act constituted a complete code relating to the ordering of security for costs in libel and slander cases. However, that decision was reversed by the Court of Appeal, in Khan v. Metroland, 2005 14941 (ON CA), [2005] O.J. No. 1787 (C.A.).
[31] LaForme J.A., speaking for the court, held that an order for security for costs may be made under rule 56.01 in cases to which the Act applies, so long as the particular sub-rule under which the order is made does not directly conflict with section of 12(1) of the Act. In reaching this conclusion, he said this, at para. 25:
Rather than demonstrating an intention to create an extensive self-contained code of procedure for libel and slander cases or to signal conflict with the Rules, s. 12 of the LSA demonstrates an intention that the LSA and the Rules should operate in conjunction with one another.
[32] Although not necessary to the court’s decision, LaForme J.A. also noted at para. 32 that none of sub-rules 56.01 (a), (b), (c), (d), or (f) address the criteria for ordering security for costs under section 12(1) of the Act, and accordingly they do not appear to create any potential for direct conflict. That is the situation in the case at bar. The order was made pursuant to sub-rule (c), which permits an order to be made where an unpaid order for costs exists in the same or another proceeding. Section 12 does not address such a criterion, or anything similar to it.
[33] The submissions of the appellants focus on s. 12(2). Since the alleged libel alleged a criminal charge (fraud), they submit that an order for security for costs cannot be granted unless the respondents satisfy the court that the action is trivial or frivolous. Since Matheson J. expressly declined to so find, they submit that an order for security for costs cannot be granted. For purposes of this appeal, it is conceded that the reference in s. 12(2) to s. 5 of the Act is not relevant.
[34] To analyze this issue, it is necessary to examine the entire section in context. LaForme J.A., at para. 29 of Khan, interpreted s. 12(1) of the Act as follows:
Section 12(1) of the LSA provides for security for costs in libel and slander cases in the limited circumstances where:
The plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant;
The defendant has a good defence on the merits and that the statements complained of were made in good faith; or
The grounds of action are trivial or frivolous.
[35] In our view, on a plain reading of s. 12(2), where the alleged libel involves a criminal charge, criteria 1 and 2 are not available to a defendant, and he is restricted to criterion 3 in order to get an order under that section. In other words, he would have to prove that the grounds of action are trivial or frivolous.
[36] A conflict with the Rules might arguably exist if a defendant were relying on rule 56.01(1)(e), since those grounds are similar to criteria 1 and 3. Even that argument is tenuous, though, since sub-rule (e) requires both that the action be frivolous and vexatious and that the plaintiff have insufficient assets to pay an order for costs. That sets the bar even higher than does s. 12(2) of the Act.
[37] Here, however, the criterion relied upon is something completely different, i.e. sub-rule (c), the existence of an unpaid order for costs. No potential for conflict exists between that sub-rule and s. 12 because that criterion is not found in the Act.
[38] Further, in our view, the use of the words “under this section” in s. 12(2) recognizes the existence of other potential remedies for security for costs, such as rule 56.01 provides. In other words, while the fact that the alleged libel involves a criminal charge limits the availability of an order for security for costs under s. 12, that does not mean that such an order might not be available through other avenues. This view is supported by the decision of the British Columbia Court of Appeal in Sorokin v. Trail Times Ltd., 1960 597 (BC CA), [1960] B.C.J. No 28 (C.A.). In that case, the court considered s. 16 of the British Columbia Libel and Slander Act, R.S.B.C. 1948, ch. 184, which provided for security for costs in terms similar to the Ontario statute, as compared with their rules of practice which also provided for security for costs. Section 16 contained a qualification comparable to our s. 12(2) in providing that “where the alleged libel involves a criminal charge, the defendant shall not be entitled to security for costs under this Act unless he satisfied the Court or Judge that the action is trivial or frivolous”.
[39] The B.C. Court of Appeal held that the words “under this Act” imply that other remedies for security for costs may be concurrent with the statutory provision, and that the defendant has the right of choice of remedy unless there is a “repugnancy” between the rule and the section. There, since the two provisions dealt with distinct and separate events, no such conflict existed.
[40] For these reasons we find no conflict between rule 56.01(c) and s. 12 of the Act. We are satisfied that the plaintiffs were entitled to seek their remedy under that rule, and that Matheson J. was not required to consider whether the requirements of s. 12(2) had been met in this case.
[41] We conclude, however, that Matheson J. did err with respect to the scope of his order. He ordered that if security for costs of $100,000 was not posted by the defendants within 90 days, then the Statement of Defence and Counterclaim would be struck out. While an order for security for costs is appropriate to prevent a litigant, who has already failed to pay a costs order, from continuing to prosecute a claim (or, in this case, a counterclaim) until appropriate security is in place, it has long been held that no party should have to give security for costs as a condition of simply defending itself: Toronto-Dominion Bank v. Szilagyi Farms Ltd. (1988), 1988 4745 (ON CA), 65 O.R. (2d) 433 (C.A.). Striking out the Statement of Defence for failing to post security for costs would do just that.
[42] The appeal is allowed to this extent only: the order of Matheson J. is varied such that, in the event the appellants do not post the required security for costs by December 17, 2010, their Counterclaim (but not their Statement of Defence) will be struck out. The appeal is otherwise dismissed.
[43] With respect to costs, we will receive written submissions on costs from the parties as follows: the submissions of the respondents within 15 days; the submissions of the appellants within 15 days thereafter; and any reply submissions from the respondents within 10 days thereafter.
Heeney J.
Matlow J.
Mackinnon J.
Released: November 19, 2010
DIVISIONAL COURT FILE NO.: DC-09-130, DC-09-131, DC-09-178-ML
ONTARIO, SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Matlow, Heeney and Mackinnon JJ.
BETWEEN:
LIBERTY MUTUAL INSURANCE COMPANY and LIBERTY INSURANCE COMPANY OF CANADA Plaintiffs/Respondents
– and –
ROSE VENNERI DONATELLI, MICHAEL VENNERI, PROFESSIONAL COUNSELLING SERVICES and COMPREHENSIVE HEALTH CLINIC INC. Defendants/Appellants
Released: November 19, 2010