Better Business Bureau of Eastern and Northern Ontario, 2014 ONSC 2623
COURT FILE NO.: DC13-1900 (Ottawa)
DATE: 2014/04/30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Walsh Energy Inc. (c.o.b. as “The Energy Centre”) and Waltek Energy Services Inc. (c.o.b. as “Waltek” or “Energy Plus and Chateau Heating and Cooling”)
Plaintiffs
(Appellants)
– and –
Better Business Bureau of Ottawa-Hull Incorporated/Bureau D’Éthique Commerciale D’Ottawa-Hull Incorporée (c.o.b. as “Better Business Bureau Serving Eastern and Northern Ontario and the Outaouais”) and Better Business Bureau of Ottawa-Hull Inc.
Defendants
(Respondents)
John H. Yach, counsel for the Plaintiffs (Appellants)
Karen Perron, counsel for the Defendants (Respondents)
HEARD: April 22, 2014
REASONS FOR JUDGMENT
PELLETIER, J.
Introduction
[1] In 2009, the plaintiffs sued the defendants for damages in excess of $3,000,000.00. The action was in defamation, loss of reputation, past and future loss of profits, and punitive, aggravated and exemplary damages. The largest portion of the claim was for damages resulting from loss of profits, past and future, in the amount of $2,000,000.00.
[2] A 13 day trial in the fall of 2012 resulted in a dismissal of the action in its entirety. The Court held that while liability had not been proven, damages in the amount of $15,000.00 had resulted from the defendants’ impugned actions.
[3] On March 15, 2013, the Court, in brief oral reasons, ordered costs in the defendants’ favour of $348,135.96. The dismissal of the action and the cost order is presently under appeal. By operation of section 19 of the Courts of Justice Act, and having regard to the damages determined at trial, the appeal lies before the Divisional Court, on both the merits and the issue of costs.
[4] The defendants bring the present motion seeking security for costs of both the costs awarded at trial ($348,135.96) and the projected appeal costs on a partial indemnity basis ($68,417.45). The total amount at issue is $416,553.41, sought to be secured by way of the order which the defendants seek presently.
The law
[5] The present motion is brought primarily on the basis of Rule 56.01(1)(d) of the Rules of Civil Procedure, which provides that the Court, on motion brought by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that the plaintiff or applicant is a corporation and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.
[6] In assessing the merits of such a motion, the Court must firstly decide whether it is established that good reasons to believe that the plaintiff/appellant has insufficient exigible assets in Ontario to satisfy a cost order if unsuccessful in the action or appeal.
[7] If established on a prima facie basis, the burden of proof, for practical reasons, shifts to the plaintiff/appellant to establish that the order is not necessary or that it would be unjust.
[8] The onus can be met by establishing that sufficient and readily available assets exist, or that the merits of the case compel a hearing despite the limited means of the plaintiff/appellant.
The positions of the parties
[9] The defendants are of the view that the plaintiffs’ assertions concerning their financial status is exaggerated, contradictory and not supported by an objective examination of their affairs, including an examination of unaudited financial statements, self-generated valuations of certain items of property, and the highly variable and uncertain nature of such items as cash on hand and accounts receivable. The defendants are of the view that the plaintiffs’ exigible assets are of significantly lesser value than the amount sought by way of security for costs.
[10] The plaintiffs take the opposite view. It is suggested that the valuations provided of such items as equipment, supplies, tools and vehicles are well within reasonable standards, and that they have an interest in meeting any cost obligations that could eventually be confirmed or adjusted inasmuch as the plaintiffs represent established, stable and profitable going concerns. In the plaintiffs’ view, the defendants are by and large in the same position as they were prior to trial in relation to their view of the plaintiffs’ holdings and solvency and that the present motion could and should have been brought prior to trial if seen as necessary by the defendants to protect their cost interests in this litigation.
[11] The plaintiffs further suggest that the defendants are not prejudiced in the conduct of the case and its cost consequences as they are covered by a litigation cost insurance policy.
Analysis
[12] Notwithstanding certain discrepancies in the plaintiffs’ assertions over time concerning the value of its assets, the weight of the evidence would tend to show that the plaintiffs are not impecunious. The plaintiffs do not fall into the category of corporate litigants incapable of meeting its cost obligations. The factors to be considered in determining a corporate litigant’s ability to meet a cost order include the following:
a) A failure to meet ongoing liabilities,
b) Indicia of insolvency,
c) Instability as evidenced by temporary dissolution or the failure to meet filing requirements,
d) Evidence that the company was created solely for the purposes of litigation;
e) The existence of registered security interests in some or all assets;
f) Outstanding litigation judgments or liens,
g) The sudden and rapid disposition of significant assets;
h) Failure to meet basic operating expenses such as rents, payroll or other periodic payments;
i) An interruption in the company’s operations.
[13] The plaintiffs’ submissions that they do not fall into any of the above categories is supported by the evidence and, if not determinative, quite compelling in this motion.
[14] Moreover, it is not suggested that the plaintiffs’ have no assets or that their value significantly total an amount below the cost order presently existing and the cost consequences which the appeal could generate.
[15] By any examination of the suggested total cost exposure and the plaintiffs’ assets, there appears to be sufficient assets to satisfy the cost consequences which could result, including the upholding of the entire trial cost order and the cost order which the defendants’ claim could reasonably result from an unsuccessful appeal.
[16] The imposition of security for the complete amount sought would no doubt create significant hardship for the plaintiffs and would jeopardize its continued business activity.
[17] The motion is therefore not devoid of merit, however, ordering security for costs of the entire amount sought would have the undesirable effect of preventing the plaintiffs from pursuing the present litigation to its reasonable conclusion.
[18] Equally compelling is the submission that the plaintiffs’ financial position and the inventory of its assets have been by and large constant since the filing of the statement of claim. The plaintiffs’ profits have declined over the past several years. They attribute this in large measure to the alleged defamatory conduct of the defendants. This was the issue at trial. The plaintiffs have not suddenly become less favourable situated, financially, since the trial.
[19] Security for costs must be sought once it is discovered or determined to be an issue. No order was sought prior to trial. Understandably, to have done so would have required the defendants to concede the financial difficulties which the plaintiffs were alleging; difficulties which the plaintiffs were laying at the defendants’ feet. Be that as it may, the plaintiffs proceeded and were entitled to proceed on the basis that security for costs were not being sought.
[20] Finally, the Court has concluded that there is merit to the appeal. It is neither possible nor necessary to predict the outcome of the appeal. There is no suggestion that it is frivolous. The costs ordered were significant and form the basis of a valid request for review.
Conclusion
[21] For the reasons cited above, the motion for security for costs in relation to the costs ordered at trial is dismissed. The motion as it relates to security for costs concerning the appeal involves slightly different considerations.
[22] The plaintiffs, as it stands and although subject to a stay pending the outcome of the appeal, are bound by the cost order made at trial. There is a presumption of validity concerning that order. It must be factored into the analysis as to whether there are, presently, good reasons to believe that the plaintiffs have insufficient assets to pay the defendants’ costs if unsuccessful on appeal.
[23] Having regard to the issues on appeal, the procedure and costs associated with an appeal pursuant to section 19 of the Courts of Justice Act to the Divisional Court, and a reasonable cost order which may result, the interests of justice are served by requiring the plaintiffs to provide security for costs, in relation to the appeal, in the amount of $40,000.00.
[24] The following orders are accordingly made:
Defendants’ (Respondents on appeal and moving parties presently) motion for security for costs in respect of costs ordered at trial ($348,135.96) is dismissed;
Defendants’ motion for security for costs in relation to the present appeal is granted, requiring the plaintiffs to post security for costs in the amount of $40,000.00;
The appeal herein is stayed until the terms of this order are complied with;
Unless able to agree otherwise, the parties’ cost submissions, not to exceed 2 pages in addition to supporting materials, to be served and filed within 45 days of the release of the judgment herein.
Justice Robert Pelletier
Released: April 30, 2014
Better Business Bureau of Eastern and Northern Ontario, 2014 ONSC 2623
COURT FILE NO.: DC13-1900 (Ottawa)
DATE: 2014/04/30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Walsh Energy Inc. (c.o.b. as “The Energy Centre”) and Waltek Energy Services Inc. (c.o.b. as “Waltek” or “Energy Plus and Chateau Heating and Cooling”)
Plaintiffs
(Appellants)
– and –
Better Business Bureau of Ottawa-Hull Incorporated/Bureau D’Éthique Commerciale D’Ottawa-Hull Incorporée (c.o.b. as “Better Business Bureau Serving Eastern and Northern Ontario and the Outaouais”) and Better Business Bureau of Ottawa-Hull Inc.
Defendants
(Respondents)
REASONS FOR JUDGMENT
Justice Robert Pelletier
Released: April 30, 2014