CITATION: Galustian v. Skylink Group of Companies Inc., 2010 ONCA 645
DATE: 20101004
DOCKET: M39040 M39047 M39084 M39107 M39120 C51648
COURT OF APPEAL FOR ONTARIO
Watt J.A. (In Chambers)
BETWEEN
Richard John Charles Galustian and ISI International Ltd.
Plaintiffs (Appellants)
and
The Skylink Group of Companies Inc., Skylink Aviation Inc., Walter Arbib, Surjit Babra, Skylink Air and Logistic Support (USA) Inc., Michael Douglas and John J. (Jack) Holly
Defendants (Respondents)
David I. W. Hamer and Adam Ship, for the defendant (respondent), Michael Douglas
Keith M. Landy, for the defendant (respondent), Walter Arbib
S. Chapman, for the defendant (respondent), Surjit Babra
A. Dantowitz, for the respondent, John J. Holly
Arthur Hamilton, for the defendants (respondents), Skylink entities (The SkyLink Group of Companies Inc., SkyLink Aviation Inc. and SkyLink Air and Logistical Support (USA) Inc.)
Matthew J. Diskin, for the plaintiffs (appellants), Galustian and ISI International
Heard: August 24, 2010
Motion for security for costs for appeal from decision of Justice J. M. Spence on January 13, 2010.
Watt J.A.:
[1] Richard John Charles Galustian (Galustian) and ISI International Ltd. (ISI) commenced an action against several individuals and corporations claiming declaratory relief and damages for breach of contract, conspiracy and defamation.
[2] The individual and corporate defendants moved before a judge of the Superior Court of Justice to dismiss the action begun against them by Galustian and ISI on the ground that Ontario courts lack jurisdiction over the claim.
[3] On January 13, 2010, Spence J. dismissed the action for want of jurisdiction and assessed costs against Galustian and ISI. The substantial costs awarded in favour of each defendant remain unpaid.
[4] Galustian and ISI have appealed the decision of Spence J. and perfected their appeal.
[5] The individual and corporate defendants, the respondents in the appeal, move for an order for security for costs for the appeal, as well as for the proceeding before Spence J.
[6] For the reasons that follow, the moving parties are entitled to an order for security for costs, albeit not in the full amounts they seek.
The Background
[7] A brief description of the dramatis personae and their relationship that underpins the claims advanced by Galustian and ISI is adequate for the purposes of this motion.
[8] Galustian is a citizen of the United Kingdom. He lives and carries on business in Dubai and elsewhere in the Middle East, including Iraq. He is the beneficial owner and a director of ISI, a Dubai-incorporated company. In his personal capacity and through ISI, Galustian is involved in security services, communications, secure housing and logistical support activities.
[9] The SkyLink group of companies (SkyLink) is incorporated in Ontario and carries on business throughout the world in transportation and logistics. Its principal shareholders are Walter Arbib (Arbib) and Surjit Babra (Babra). Both Arbib and Babra live in Ontario.
[10] Michael Douglas (Douglas) is a citizen of the United Kingdom who lives in Dubai. He worked for SkyLink at the time the cause of action arose.
[11] John J. (Jack) Holly (Holly) is an American citizen who lives in California. For several years he worked in Iraq for the U.S. government. There, he served as Director of Reconstruction Logistics in the United States Department of Defence.
[12] In his original action, Galustian sued SkyLink only to recover a 10 percent shareholding he claims to have been promised in a related company incorporated to operate in the logistics business in Iraq and the Middle East. The agreement involved Galustian, Douglas and SkyLink.
[13] For procedural reasons, Galustian discontinued his original action and commenced an action that, after various amendments, alleged breach of contract, conspiracy and defamation and included all individual and corporate defendants.
The Other Proceedings
[14] SkyLink, through a wholly-owned subsidiary began proceedings in Dubai in April 2009 against Douglas and SkyLink Arabia. SkyLink alleges that Douglas withheld profits and SkyLink Arabia’s securities. A Dubai court has assumed jurisdiction over this dispute and will have to determine share entitlement, including Galustian’s entitlement.
[15] Galustian has also begun proceedings against Holly in Virginia. There, he seeks damages for defamation for the same conduct that funds his claim here. The facts pleaded in Virginia mirror those pleaded here. The jurisdiction of the Virginia court is also controverted in those proceedings.
The Decision of the Motion Judge
[16] Spence J. dismissed the action on the basis that there was no real and substantial connection between the forum selected (Ontario) and either the claim (an alleged agreement and other conduct in Dubai) or the defendants. The motion judge considered the suit in Ontario particularly unfair to Douglas and Holly, neither of whom had or have any connection to this province. Indeed, neither Galustian nor ISI has any independent link to Ontario.
[17] The motion judge considered that the core of this action is in Dubai where litigation about it has already begun and should continue.
The Positions of the Parties
[18] The moving parties invoke Rule 61.06(1)(b) and its incorporation of Rule 56.01 as the source for their claim for security for costs.
[19] Mr. Hamer, for Douglas, carried the bulk of the argument for the moving parties. He submitted that they had made out their case under any or all of Rules 56.01(1)(a), (b) or (d).
[20] Mr. Hamer says that Galustian is a Dubai resident with no connection to or assets in Ontario. ISI was incorporated in Dubai. It carries on business there and elsewhere in the Middle East. Like its principal, ISI is a Dubai resident, bankrupt of any connection with Ontario and without assets here.
[21] Mr. Hamer reminds that Galustian has begun a parallel proceeding in which he seeks the same relief on the same factual allegations against Holly in Virginia. And there are, as well, parallel proceedings against Douglas in Dubai grounded in the same circumstances.
[22] Mr. Hamer contends that Galustian is a well-resourced claimant conducting commercial litigation simultaneously in two jurisdictions. All the principals in the dispute reside in a foreign jurisdiction where its subject-matter arose. The moving parties are unable to enforce any costs award in Dubai, are already owed substantial costs by Galustian, and are about to incur further costs responding to an appeal in a jurisdiction that has no connection with the substance of or the principals in the dispute. The failure to seek similar security below is not terminal for the claim now advanced.
[23] The remaining moving parties adopt the position advanced by Mr. Hamer. For Holly, Mr. Dantowitz adds that it is Holly whose case falls within the incorporation of Rule 56.01(1)(b): Holly is the defendant in the duplicate Virginia proceedings.
[24] In his brief submissions, Mr. Diskin for the respondent urged dismissal of the motion. The moving party is not entitled to security for costs as of right, nor even upon literal satisfaction of any or all of the applicable paragraphs of Rule 56.01(1). The remedy is discretionary. The merits of the appeal are substantial, likely to warrant reversal on the merits and of the excessive costs award. An order for security for costs is unwarranted. Galustian is well-resourced. There should be no execution before judgment.
The Governing Principles
[25] The moving parties have invoked Rules 61.06(1)(b) and (c) in support of their motion, including the incorporation by Rule 61.06(1)(b) of Rules 56.01(1)(a)–(d).
[26] The enabling language of Rule 61.06(1), as well of Rule 56.01(1), is permissive, not imperative. Each reposes in the judge before whom the motion is brought a residuum of discretion to refuse the order notwithstanding satisfaction of the requirements of the controlling sub-rule. The superintending principle that governs is the justness of the case.
[27] Only Rules 56.01(1)(e) and 61.06(1)(a) contain an express reference to the merits of the appeal. In both instances, among other things, the moving party must demonstrate that there is good reason to believe that the appeal is frivolous and vexatious. It may well be that the merits of the appeal is a factor that warrants consideration in connection with the overarching principle of whether it is just to make the order. At all events, it would not seem necessary for the moving party to demonstrate the absence of merit to the appeal in order to meet the requirements of Rules 56.01(1)(a)–(d) and 61.06(1)(b).
[28] The phrase “good reason to believe” appears in Rule 56.01(1)(d) upon which the moving parties rely. It also appears in Rule 61.06(1)(a) where it has been interpreted as indicative of a finding falling short of an actual determination or firm conclusion: Schmidt v. Toronto-Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.), at p. 5.
[29] Rule 56.01(1)(d) focuses upon the sufficiency of the Ontario assets of a corporation or nominal plaintiff or applicant to pay the relevant costs. The financial responsibility of the beneficial owner of the corporation, a nominal plaintiff, would not seem relevant where there is good reason to doubt the sufficiency of his or her Ontario assets: Lindhorst v. Aviva Insurance Co. of Canada, 2009 ONCA 191.
[30] These proceedings arise out of commercial transactions involving experienced, sophisticated parties. There seems no reason in principle why the moving parties should bear the risk of success, yet find it hollow because their substantial costs are beyond recovery: Aegis Biomedical Technologies Ltd. v. Jackowski (1996), 1996 CanLII 952 (ON CA), 28 O.R. (3d) 558 (C.A. – Ch’rs), at p. 560.
The Principles Applied
[31] Several circumstances sufficient to engage the discretion to award security for costs are evident here.
[32] The conduct upon which the claims for breach of contract, conspiracy and defamation are based took place in Dubai and elsewhere in the Middle East. The alleged agreement involved an interest in a Dubai company. The principals, Galustian and Douglas, lived and worked in Dubai. It was there and elsewhere in the Middle East that the new company was to carry on its business.
[33] Galustian is a citizen of the United Kingdom. He lives in Dubai. He is not and never has been a resident of Ontario, nor does he have any business or other connection with this province. He has no assets here.
[34] Galustian has begun and is actively pursuing another proceeding for the same relief he seeks here. In Virginia. Against Holly, albeit not the other defendants who seek security for costs. The factual underpinnings of his Virginia claim, as well the remedy he seeks, replicate those alleged and sought here.
[35] The costs award made by Spence J. on the motion to dismiss the action remains outstanding. The amounts are substantial. Nothing has been paid. Not a nickel. To anyone.
[36] ISI, a Dubai corporation, is a nominal plaintiff in the action. It is a corporate vehicle through which Galustian conducts some of his business. There is good reason to believe ISI has no assets here. Its sole connection to this province seems to be its involvement in this litigation. ISI has never carried on business in Ontario.
[37] Galustian has chosen to sue here, thus to be subject to the rules of the forum he has chosen. Those rules dictate, in these circumstances, that he provide security for costs of both the proceedings below and of the appeal.
Conclusion
[38] For these reasons, Galustian and ISI will post security for costs in a form satisfactory to the respondents within 60 days of this order in an amount that consists of the aggregate of the following, inclusive of all applicable taxes:
Douglas $102,926.48
SkyLink $ 21,000.00
Arbib $ 14,500.00
Babra $ 12,500.00
Holly $ 41,054.11
TOTAL $191,980.59
Until this security is posted, neither Galustian nor ISI shall take any further steps in this appeal.
[39] The moving parties are entitled to their costs of this motion in the amount of $5,000.00 (Douglas) and $1,000.00 for each of the remaining respondents, inclusive of all applicable taxes.
RELEASED: October 4, 2010
“David Watt J.A.”