CITATION: 1554366 Ontario Inc. v. Fryett, 2015 ONSC 5089
COURT FILE NO.: DC-15-0059-00ML
DATE: 2015-08-12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1554366 Ontario Inc.
Yadvinder S. Toor, for the Plaintiff
- and -
James Fryett Architect Inc. and Harrington Construction Inc.
Charles Simco and Megan Marrie, for the Defendant
HEARD: July 13, 2015
RULING
M. J. Donohue, J.
[1] This motion for leave to appeal was heard by way of written submissions.
[2] The Defendant, Fryett, seeks leave to appeal to the Divisional Court from a motion involving the interlocutory order of LeMay, J. dated May 25, 2015. He dismissed the Defendant’s motion seeking an order for security for costs pursuant to Rule 56.01(1)(d).
[3] Rule 56.01(1)(d) provides that the Court has discretion to award security for costs where the plaintiff is a corporation and there is good reason to believe that the Plaintiff has insufficient assets in Ontario to pay the costs of the defendant.
[4] The Defendant sought an order for $200,000 for security for costs on the basis that the Plaintiff, an incorporated company, had liabilities in excess of its assets.
[5] The most significant liability cited by the Defendant was a shareholder loan of $1,487,793 shown as a debt on the financial statements.
[6] The Plaintiff argued that the shareholder loan was equity as stated by the principal shareholder, Mr. Dhaliwal, in his affidavit. The Court accepted this evidence, that it was equity to the company.
[7] Excluding the shareholder loan as an asset, the justice concluded, on the facts, that there was $400,000 in assets after other debts were satisfied and that the company had an annual income of approximately $100,000. On that basis he found the plaintiff company retained sufficient assets to meet an award for costs and denied the motion.
Test for Leave to Appeal to Divisional Court
[8] The test for granting leave to appeal is set out under Rule 62.02(4) and is not easily granted. Leave shall not be granted unless either Rule 62.02(4)(a) or Rule 62.02(4)(b) are satisfied. Each involves a two-part test and in each case, both aspects of the two-part test must be met before leave is granted.
[9] Rule 62.02(4)(a) allows for leave where there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted.
[10] Rule 62.02(4)(b) allows for leave where there appears, to the judge hearing the motion, good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.
[11] In considering whether there is good reason to doubt the correctness of the decision the court is to “ask itself whether the correctness of the decision is open to “very serious debate” and, if so, is it a decision that warrants resolution by a higher level of judicial authority”. See Brownhall v. Canada, 80 O.R. (3d) 91 para 30.
Analysis
[12] The defendant cited the decision of Unisource Canada Inc. v. Hongkong Bank of Canada, [1998] O.J. No. 5586 (Ont. Ct-Gen Div.)(QL) as standing for a conflicting decision on the treatment of shareholder’s loans. In that decision there was discussion as to whether the loan was a current liability or a long-term debt and determined it was a secured debt to the shareholders. It was nonetheless described as a liability.
[13] In this case, the justice did not set out, in his reasons, what assets were totalled and what liabilities were deducted such that I find it unclear what all is considered. For this reason it is desirable that leave to appeal be granted.
[14] The defendant, therefore, has grounds for leave to appeal under Rule 62.02(4)(a).
Conclusion
[15] Accordingly, leave to appeal is granted.
M. J. Donohue, J.
Released: August 12, 2015
CITATION: 1554366 Ontario Inc. v. Fryett, 2015 ONSC 5089
COURT FILE NO.: DC-15-0059-00ML
DATE: 2015-08-12
SUPERIOR COURT OF JUSTICE – ONTARIO
1554366 Ontario Inc.
Plaintiff
- and -
James Fryett Architect Inc. and Harrington Construction Inc.
Defendant
RULING
M.J. Donohue, J.
Released: August 12, 2015