CITATION: O’Brien v. Blue Heron Co-Operative Homes Inc. et al., 2017 ONSC 7168

DIVISIONAL COURT FILE NO.: 17-2315

DATE: 2017/12/14

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

STEPHEN O’BRIEN

Appellant/respondent on the motion

– and –

BLUE HERON CO-OPERATIVE HOMES INC., MICHELLE BAINBRIDGE, LUC ARVISAIS, CORINA GOLD, CELINE CARRIERE, CO-OPERATIVE HOUSING FEDERATION OF CANADA and CO-OPERATIVE HOUSING ASSOCIATION OF EASTERN ONTARIO

Respondents/

moving parties on the motion

Appellant, Self-Represented

Joseph Jebreen for the Respondents Blue Heron Co-Op, Luc Arvisais, Michelle Bainbridge and Corina Gold

Neil Milton for the Respondents the Co-Operative Housing Federation of Canada, The Co-Operative Housing Association of Eastern Ontario and Celine Carriere

HEARD at Ottawa: October 23, 2017

REASONS FOR DECISION

R. SMITH J.

Overview

[1] The respondents have brought a motion seeking an order that the appellant, Stephen O’Brien (“O’Brien”) provide security for costs for his appeal of a Small Claims Court Decision dismissing most of his claims. The respondents allege that O’Brien’s appeal is frivolous and vexatious because it is completely devoid of merit. They also submit that it would be just to grant an order for security for costs in the circumstances.

[2] O’Brien argues that his appeal is not devoid of merit and is not frivolous and vexatious. As such, he submits that security for costs should not be ordered. He also submits that he receives ODSP and would be unable to pay any amount ordered for security for cost. Granting the motion for security for costs would effectively amount to dismissing his appeal and he submits that this would be unjust.

[3] O’Brien’s claim for damages is based on the fact that he was removed as a director of Blue Heron Co-Operative Homes Inc. (“Blue Heron”). A majority of the members of Blue Heron voted to remove him as a director at a meeting held after the required notice was given to each member. O’Brien does not allege any procedural unfairness in the conduct of the members meeting.

[4] The appellant acknowledges that the proper legal procedures were followed to remove him as a director of Blue Heron. Notwithstanding this he argues that the directors of Blue Heron and in particular its manager, Michelle Bainbridge, acted on improper motives to initiate the process to have him removed as a director, and this forms the basis of his claims. His claim for defamation against Ms. Bainbridge and Blue Heron were allowed to proceed to trial.

[5] The first group of moving parties on this motion, referred to as the “Sector Respondents”, are as follows:

(a) The Co-Operative Housing Association of Eastern Ontario (“CHASEO”) is a co-operative of local housing co-operatives. The members of CHASEO are housing co-operatives such as the respondent Blue Heron. CHASEO is a small organization with a modest budget and one full time staff;

(b) Céline Carriere is the executive director of CHASEO, and its sole full time employee; and,

(c) The Co-Operative Housing Federation of Canada (The “Co-Op Federation”) represents the co-operative housing sector nationally.

[6] The second group of moving parties on this motion are referred to as the “Blue Heron Respondents” and they are:

(a) The Blue Heron Co-Operative Homes Inc., Michelle Bainbridge its manager, and Luc Arvisais and Corina Gold who were former directors of Blue Heron.

Issues

[7] The issues to be decided in this motion are as follows:

(1) Is there good reason to believe that the appeal against the Sector Respondents and the Blue Heron Respondents is frivolous and vexatious?

(2) Is there good reason to believe that the appellant has insufficient assets to pay a costs award?

(3) Would making an order for security for costs be just in the circumstances?

Factual Background

Previous Claim against Blue Heron

[8] O’Brien has a history of litigating against Blue Heron which is the co-operative in which he lives. In 2014, O’Brien brought an application against Blue Heron for (i) an order under s.146 of the CCA to appoint an inspector to investigate Blue Heron and (ii) an order under s. 178 of the CCA compelling Blue Heron to comply with the CCA and its bylaws (the “2014 Application”).

[9] O’Brien’s 2014 Application was dismissed on May 5, 2015. At paragraph 18 of his judgment, Justice Rutherford found that O’Brien levelled scathing accusations against Michelle Bainbridge personally and other board members that were not justified and stated:

The rather scathing accusations levelled by Mr. O’Brien against the Co-Op management generally and against certain named and un-named members who have served on its Board by a disaffected member who has studied the by-laws and written policies assiduously and seized all available opportunities to point to any perceived lapse or error as evidence of a conspiracy to dominate those who for some reason are out of favour or otherwise marginalized.

[10] After Justice Rutherford dismissed his application, O’Brien was removed as a director at a member’s meeting held on June 22, 2015. O’Brien appealed the dismissal of his 2014 Application to the Ontario Court of Appeal and brought a motion to introduce fresh evidence. Both the appeal and his motion were dismissed by the Court of Appeal on December 8, 2015.

[11] The Court of Appeal’s decision included the following finding in O’Brien’s case:

In our view, the application judge’s impugned remarks simply reflected the need for clear evidence, rather than bald assertions, to support the serious allegations, including allegations of criminal conduct, levied by the appellant against Blue Heron’s management.

The 2016 Claim

[12] After O’Brien’s appeal of his 2014 Application was dismissed, he commenced the 2016 claim on July 29, 2016. The Plaintiff’s Claim contained 161 paragraphs and was 44 pages in length. The supporting documents comprised an additional 360 pages. O’Brien amended the Claim on January 27, 2017 to increase his claim for damages to $25,000 and amended it again on May 3, 2017 to add three additional defendants.

[13] In the 2016 Claim, O’Brien named seven defendants: the four Blue Heron Respondents, and the three Sector Respondents. O’Brien alleged that one or several of the Blue Heron Respondents were liable for breach of fiduciary duty, breach of contract, negligent breach of s. 108 of the Co-Operative Corporation Act, R.S.O. 1990, C35 (the “CCA”), negligent supervision and retention Michelle Bainbridge and for defamation by Blue Heron and Bainbridge. O’Brien’s main basis for these claims is that he was removed from the Blue Heron board of directors by a vote of its members.

[14] O’Brien also alleged that the Sector Respondents breached contractual and fiduciary duties owed to him and induced the Blue Heron Respondents to breach their contractual and fiduciary duties owed to him.

[15] After being served with O’Brien’s claim in 2016, the Blue Heron Respondents immediately brought a motion to strike his claim pursuant to Rule 12.02 of the Rules of Small Claims Court. The Sector Respondents joined in that motion. The motions judge dismissed all of the claims against the Sector Respondents and the Blue Heron Respondents except for the claim of defamation against Blue Heron and Ms. Bainbridge.

Analysis

[16] The requirements to obtain an order for security for costs are set out in rule 61.06(1) of the Rules of Civil Practice 61.06 (1) states as follows:

61.06 (1) In an appeal where it appears that,

(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;

(b) an order for security for costs could be made against the appellant under rule 56.01; or

a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just. R.R.O. 1990, Reg. 194 r. 61.06 (1); O. Reg. 465/93, s. 6.

[17] The Sector Respondents agree with and adopt the analysis of the Blue Heron Respondents that Rule 61.06 (1) is to be applied as follows:

(a) the moving party bears the onus of establishing that one of the grounds for ordering security for costs exists;

(b) once the moving party has established grounds for ordering security for costs, an inquiry is commenced;

(d) the rule grants the Court wide discretion to fashion an appropriate Order that is just in the circumstances.

[18] The permissive “may” in the language of rule 61.01 (1) provides a motions judge with discretion as to whether the order for security should be granted. The overreaching principle governing the exercise of discretion is the “justness of the order sought”.

The Small Claims Court Judge’s Decision

[19] The Small Claims Judge found that:

(a) O’Brien was removed as a director at a member’s meeting on June 22, 2015 by majority vote;

(b) O’Brien admitted that the June 22, 2015 members’ meeting to remove him as director was conducted in a professional and non-partisan manner by an impartial guest chair, and he was provided with a full opportunity to be heard at the meeting to contest his removal;

(d) O’Brien had no standing to allege a breach of s. 108 of the CCA on Blue Heron’s behalf;

(e) O’Brien’s Claim could have been raised in the 2014 Application, and so Res judicata applied;

(f) The Small Claims Court cannot grant the declaratory relief requested by O’Brien; and

(g) The claim for defamation against Bainbridge and Blue Heron was not dismissed and will proceed to trial.

Unpaid Costs Orders

[20] Blue Heron has obtained costs orders against O’Brien that remain unpaid in part. In the 2014 Application and the appeal that ensued, Justice Rutherford ordered O’Brien to pay costs of $1,133.18 plus interest and the Court of Appeal ordered him to pay costs of $1500 plus interest. O’Brien and Blue Heron have attempted to come to an agreement for the repayment of the costs ordered but have not been able to reach an agreement. O’Brien has made 19 payments of $55/ month to date and one payment of $25 for a total of $1070 towards the costs orders. There remains an outstanding balance owing of $1626.96 owing to Blue Heron at this time.

Issue # 1

Is there good reason to believe that the Appeal against the Sector Respondents and Blue Heron Respondents is frivolous and vexatious?

Sector Respondents

[21] The amount claimed against CHASEO and the Co-Op Federation was $2500, which is below the prescribed amount to permit an appeal. O’Brien did not claim any amount of damages against Celine Carriere.

[22] Section 31(a) of the Courts of Justice Act, R.S.O. 1990, c C. 43 states as follows:

An appeal lies to the Divisional Court from a final order of the Small Claims Court in an action,

(a) for the payment of money in excess of the prescribed amount, excluding costs; or

(b) for the recovery of possession of personal property exceeding the prescribed amount in value. R.S.O. 1990, c. C.43. s. 31; 2009, c. 33, Sched. 2, s. 20 (9, 10).

[23] Section 2 (1) of the regulation states that for the purposes of clause 31 (a) of the Act, the prescribed amount is $2,500. O. Reg. 317/11, s. 1.

[24] O’Brien claimed damages of precisely $2,500 against two of the three Sector Respondents. The amount of his Claim against them is below the threshold required to allow an appeal to the Divisional Court. No damages were claimed against Céline Carriere personally and so this is also below the threshold.

[25] In Action Auto Leasing & Gallery Inc. v. Sandra L. Robillard and Daren Payne, 2011 ONSC 3264, Heaney J. considered the circumstances where a plaintiff and a defendant could appeal an award from a decision of the Small Claims Court. At paragraph 44 of his decision he held that where a plaintiff in an action, seeks the payment of more than $2500…, they have a right of appeal with respect to a final order made in that action.

[26] The maximum amount of damages that the appellant could have hoped to obtain in his Claim against either CHASEO or the Co-Op Federation was $2500. This is below the prescribed amount to permit an appeal because it is not in excess of $2500.

[27] Would either CHASEO or the Co-Op Federation have had a right of appeal if the appellant had been fully successful at his trial and recovered $2500 against each of them? They would not have had a right of appeal because the amount would not have been in excess of the prescribed amount. The same logic applies to the plaintiff if he was not successful against them.

[28] The appellant argues that he has a right of appeal because he claimed damages of more than $2500 in the whole action. When the claims against the other defendants are added together, his total claim for damages exceeded $2500. O’Brien argues that he has a right of appeal against each Sector Respondent even when his claim against them individually did not exceed $2500. I do not agree with this position and find that there is good reason to believe that O’Brien does not have a right of appeal against any of the Sector Respondents where the amount of his claim for damages against them individually did not exceed the prescribed amount of $2500.

Sector and Blue Heron Respondents

[29] In Pickard v. London (City) Police Services Board, 2010 ONCA 643, 268 O.A.C. 153., Watt J. (as he then was) set out the test to be applied to determine if an appeal was frivolous and vexatious. He told that the test was whether there was “good reason to believe” that the appeal was frivolous and vexatious and the appellant lacked sufficient assets to pay appeal costs. At paragraph 18 he stated as follows:

“The standard imposed by “good reason to believe” does not demand that the motion judge reach a definitive conclusion, make an affirmative finding or actually determine that the appeal is frivolous and vexatious and that the appellant lacks sufficient Ontario assets to pay the appeal coasts. Rather, “good reason to believe” suggests a tentative conclusion of absence of merit and assets: Schmidt v. Toronto-Dominion Bank (1995), 1995 3502 (ON CA), 24 O.R. (3d) 1 (C.A.) at p. 5.”

[30] In Lukezic & Walker Hall Winery Ltd. v. RBC, 2011 ONSC 5263, the Ontario Superior Court accepted the following non-exhaustive list of factors to consider when determining whether a proceeding is vexatious:

(a) the bringing of one or more actions to determine an issue which has already been

determined by a court of competent jurisdiction constitutes a vexatious

proceeding:

(b) Where it is obvious that an action cannot succeed, or if the action would lead to no possible good, or if no reasonable person can reasonably expect to obtain relief, the action is vexatious;

(c) Vexatious actions include those brought for an improper purpose. Including the harassment and oppression of other parties by multifarious proceedings brought for purposes other than the assertion of legitimate rights;

(d) It is a general characteristic of vexatious proceedings that grounds and issues raised tend to be rolled forward into subsequent actions and repeated and supplemented, often with actions brought against the lawyers who have acted for or against the litigant in earlier proceedings;

(e) In determining whether proceedings are vexatious, the court must look at the whole history of the matter and not just whether there was originally a good cause of action;

(f) The failure of the person instituting the proceedings to pay the costs of unsuccessful proceedings is one factor to be considered in determining whether proceedings are vexatious; and

(g) The respondent’s conduct in persistently taking unsuccessful appeals from judicial decisions can be considered vexatious conduct of legal proceedings.

[31] A vexatious proceeding is one taken to annoy or embarrass the respondent or has been conducted in a vexatious manner. In this case O’Brien made similar allegations of improper conduct by Blue Heron and made similar allegations of impropriety against Blue Heron in the claim he made in 2014 which was dismissed on appeal. One of the characteristics of a vexatious proceeding is where a party litigates the same issues that have already been decided. This has occurred in this case and is one of the factors set out in Lukezic & Walker Hall Winery Ltd. v. RBC. The appellant is making the multiple claims against seven different parties without setting out a factual foundation which would support such a claim. Finally, the appellant’s actions are motivated by his anger and seeking revenge for being removed as a director at a properly constituted meeting of members. For the above reasons, I find that the appellant is acting in a vexatious manner.

[32] A director of a Co-Operative corporation owes statutory and fiduciary duties to the corporation, but it would take exceptional circumstances to find that a director owed a fiduciary duty towards another director of the Co-Operative Corporation. In the case of Beamish v. Solnick Estate 1980 O.J. No. 87 a director was found to have a cause of action against another director in the unusual circumstances where both of them were equal shareholders and one breached his fiduciary duty to the corporation, breached the provisions of the Act and caused foreseeable financial harm to the other director by failing to co-operate and to complete a sale of property owned by the corporation. In this case the appellant has not made any similar factual allegations against any of the Sector Respondents in his claim or against any of the present or former directors of the Blue Heron Respondents.

[33] At paragraph 138 of his claim the plaintiff alleged:

(a) that the Sector Defendants induced a breach of contract and a breach of fiduciary duties between the plaintiff and the Co-Op,

(b) they breached the same duties owed to them by Blue Heron; and

[34] It is conceivable that, in unusual circumstances, one director may be found to owe another director of a corporation a fiduciary duty, or that a corporation may owe a director a contractual or a fiduciary duty. However, O’Brien has not pleaded any facts which would support a finding that any of the Sector Respondents or the Blue Heron Respondents breached a fiduciary or contractual duty to him or induced any of the respondents to breach their contractual or fiduciary duties to the Appellant.

[35] In addition to the fact that the amount of damages claimed did not exceed $2500, the only claim against the Sector Respondents is based on the fact that they would have advised Blue Heron that a director could be removed by a vote of a majority of the members of the co-operative after giving 10 days’ notice to the members. This advice was correct. The Sector Respondents cannot be found liable for inducing a breach of fiduciary duty, breach of contract or negligent breach of any provisions of the CCA as a result of advising Blue Heron of the correct procedure to follow.

[36] The appellant served as a volunteer director of Blue Heron and did not receive any salary. There was no contract requiring the payment of any remuneration to him for acting as a director. The appellant did sign a document consenting to act as a director and agreeing to comply with the duties of a director under the CCA. I find that there is good reason to believe that there is a complete lack of any merit in the appellants appeal against the Sector Respondents alleging that they induced a breach of contract.

[37] The appellant’s appeal against the Sector Respondents makes bald allegations, unsupported by any facts, which could possibly support a claim that any of the Sector Respondents induced a breach of any contractual or fiduciary duties owed by the directors of Blue Heron or by Blue Heron to the appellant. There is simply no factual basis for these allegations in the claim alleging any conduct by any Sector Respondent that would support the appellant’s appeal on which he would have any chance of success. I therefore find there is good reason to believe that the appellant’s claim against the Sector Respondents is completely devoid of merit and is frivolous and vexatious.

[38] Blue Heron is a not for profit, rent-geared to income, housing co-operative. Ms. Bainbridge is the coordinator and has been an employee of Blue Heron since 1981. Arvisais and Gold were past directors of Blue Heron.

[39] The same comments regarding the test to be applied as made previously about O’Brien’s vexatious conduct in paragraph 30 apply also to the Blue Heron respondents.

[40] A fiduciary duty was owed by the appellant, as a director, to Blue Heron, but on the facts alleged in his claim there is good reason to believe that there is no merit to O’Brien’s appeal of the motion judge’s finding that Blue Heron and the other directors of Blue Heron did not owe a fiduciary or contractual duty to him. The claim does not contain any factual allegations which could support a finding that any of the Blue Heron Respondents owed a fiduciary or contractual duty to the appellant.

[41] The motion judge also found that the plaintiff did not have standing to allege a breach of S. 108 of the CCA on behalf of Blue Heron. Section 108 of the Act sets out a directors and officer’s duty to act honestly and in good faith and in the best interest of the corporation. The applicant was a director of Blue Heron who was removed as a director at a meeting of the Members that was properly called with proper notice. A director, or former director does not have standing to bring a claim in the name of Blue Heron unless he obtained a court order authorizing him or her to bring a representative action under s. 68.2 of the CCA.

[42] The trial judge found that no fiduciary or contractual duties were owed by any of the Blue Heron directors or employees to the plaintiff. I agree with the motion judge’s decision. There is good reason to believe that there is an absence of any merit in the appeal of the motion judge’s finding as against Bainbridge, Arvisais and Gold based on their conduct alleged in his claim.

[43] There is also no factual basis to support the Appellants claim that the Blue Heron Respondents were negligent in supervising and retaining Ms. Bainbridge as the manager other than his bald allegation.

[44] Finally there is no dispute that the Small Claims Court does have jurisdiction to grant declaratory relief. I am satisfied that there is good reason to believe that the appeal against the Blue Heron Respondents and the Sector Respondents is vexatious for reasons previously given and is also completely without merit and as a result is frivolous and vexatious.

Issue #2

Is there good reason to believe the appellant has insufficient assets to pay costs award?

[45] The appellant still owes a balance of approximately $1800 on unpaid costs orders made by Rutherford J. and the Ontario Court of Appeal. However, the applicant has been paying these costs in the amount of $55 per month.

[46] The plaintiff receives ODSP and submitted that he could not pay any amount for security for costs. I find that in these circumstances based on the appellant’s assertion, the fact that he received ODSP and has outstanding amounts owing on costs ordered, there is good reason to believe that he does not have sufficient assets to pay any appeal costs.

Issue #3

Would granting of an Order for Security for Costs be just in the circumstances?

[47] In York University v. Markicevic, 2017 ONCA 651, 22 at para 21 the Court of Appeal held that when determining whether it would be just to order security for costs the court must balance the rights of access to justice against the moving party’s right to protection from defending uncontentious claims. The Court of Appeal stated as follows at para 22:

Once the moving party establishes that the requirements in one of the paragraphs of Rule 61.01(1) are met, an inquiry is triggered and the Court must consider the justness of the order sought:

Accordingly, even if I conclude that York satisfies the requirements of r. 61.06(1) (a) or (c), I must go on to determine whether an order for security for costs would be just. Such a determination required balancing the responding party’s right to access to justice against the moving party’s right to protection from having to defend unmeritorious positions in circumstances in which it is unlikely to recover its costs.

[48] I find that it is just to order the payment of some security for costs in these circumstances for the following reasons:

(a) There is good reason to believe that the appeal against both the Sector Respondents and the Blue Heron Respondents is vexatious and is frivolous as it is completely devoid of merit for the reasons given above;

(b) Substantial legal costs will be incurred by the respondents to respond to a meritless appeal as the appellant has raised 16 grounds of appeal against seven respondents. The respondents estimate that they will each incur in excess of $10,000 to oppose this appeal. The Blue Heron Co-Op and CHASEO do not have extensive resources.

(c) The appellant has caused the respondents to incur extensive costs as he has made allegations of many legal causes of action against seven different persons (4 individuals and 3 co-operative corporations) in a very lengthy Statement of Claim. Similar allegations of improper conduct were made against Blue Heron in O’Brien’s 2014 claim, which were dismissed by the trial judge and the Court of Appeal. The plaintiff has been allowed to proceed with his defamation Claim against Blue Heron and Ms. Bainbridge which is his major complaint. This will allow him access to the courts to proceed with the essential element of his case.

(d) The many alleged legal causes of action are based on bald allegations and are not supported by any facts on which would have any chance of success. The appellant has claimed many causes of action against several different persons and entities because he is upset at being removed as a director by a vote of the membership at a meeting properly constituted. The appellant’s main issue can be addressed inexpensively at a Small Claims Court trial and on balance it would be just to protect the respondents from having to incur substantial costs to defend against O’Brien’s unmeritorious appeal.

Disposition

[49] For the above reasons I find that it would be just to order the appellant to post security for costs in the amount of $5000 for the appeal involving the Blue Heron Respondents and $5000 for the appeal of the decision as it relates to the Sector Respondents within 60 days failing which his appeal will be dismissed.

Justice Robert Smith

Released: December 14, 2017

CITATION: O’Brien v. Blue Heron Co-Operative Homes Inc. et al., 2017 ONSC 7168

DIVISIONAL COURT FILE NO.: 17-2315

DATE: 2017/12/14

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

STEPHEN O’BRIEN

Appellant/respondent on the motion

– and –

BLUE HERON CO-OPERATIVE HOMES INC., MICHELLE BAINBRIDGE, LUC ARVISAIS, CORINA GOLD, CELINE CARRIERE, CO-OPERATIVE HOUSING FEDERATION OF CANADA and CO-OPERATIVE HOUSING ASSOCIATION OF EASTERN ONTARIO

Respondents/ moving parties on the motion

REASONS FOR DECISION

R. Smith J.

Date of Release: December 14, 2017

O’Brien v. Blue Heron Co-Operative Homes Inc. et al., 2017 ONSC 7168

Case Summary

Overview

Issues

Factual Background

Previous Claim against Blue Heron

The 2016 Claim

Analysis

The Small Claims Court Judge’s Decision

Unpaid Costs Orders

Issue # 1

Sector Respondents

Sector and Blue Heron Respondents

Issue #2

Issue #3

Disposition

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3

Legal Tests 3

Legislation 2