Court File and Parties

COURT FILE NO.: 03-CV-251448CM1 DATE: 20051114

SUPERIOR COURT OF JUSTICE - ONTARIO DIVISIONAL COURT

RE: cornel enescu and 1380470 Ontario inc. v. the wawanesa mutual insurance company et al.

BEFORE: Justice Then

COUNSEL: Justin Jakubiak for the Plaintiffs Martin Forget for the Defendants

HEARD: November 8, 2005

E N D O R S E M E N T

THEN J.:

[1] The Applicant seeks leave to appeal to the Divisional Court the order of Stewart J. requiring that the Plaintiff post security for costs pursuant to rule 56.01(1)(d).

[2] Pursuant to rule 62.02(4)(b) leave to appeal shall not be granted unless:

(b) 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.

[3] I decline to grant leave as I am not satisfied there is good reason to doubt the correctness of her decision as she exercised her discretion upon the proper principles and on the basis of the evidence before her.

[4] The background facts are that the Defendant insurer had denied a claim with respect to an alleged theft of merchandise on the Plaintiff’s premises and the Plaintiff brought this action against the Defendant. Subsequently the Plaintiff made a proposal to his creditors who were mostly banks and financial institutions under the Bankruptcy and Insolvency Act that the proceeds of this action would be paid to the trustee in favour of the creditors. The proposal was accepted by the creditors and filed with the court. There is no evidence that the Plaintiff discussed the issue of security with his creditors at the time of the acceptance of the proposal or subsequently.

[5] In exercising her discretion under rule 56.01(1)(d) Stewart J. found the following facts:

a) Mr. Enescu was a nominal plaintiff;

b) Neither Mr. Enescu or the corporate plaintiff had sufficient assets in Ontario to satisfy an eventual cost award;

c) Pursuant to the proposal, the proceeds of the action were for the sole benefit of the creditors;

d) Neither plaintiffs had any financial interest in this action;

e) The creditors who stood to gain from the action were able to post the security ordered; and

f) The plaintiffs’ had not made any efforts to inquire whether the creditors would post security for costs.

[6] She then applied Design 19 Construction v. Marks, [2002] O.J. No. 1091 to hold that creditors cannot hide behind impecunious plaintiffs on the issue of security for costs and that if they intended to reap the reward of litigation they should also bear the burden of cost consequences in the event that the action should fail unless there is positive evidence that the creditors are unable to do so. The following authorities are all to the same effect: Shadow v. Travelers Canada Corp., [1990] 40 C.P.C. (2d) 118 (O.H.C.); D.E. and J.C. Hutchinson Contracting Co. v. Windigo Community Development Corp., [1996] O.J. No. 4405 (Gen. Div.); 713784 Ontario Ltd. v. McMillan Binch, [2004] O.J. No. 690 (Ont. Sup. Ct.).

[7] In refusing leave in this case, I am content, on the issue of “correctness” as well as on the issue of “importance” to adopt as apt the words of Swinton J. in refusing leave to appeal in 713784 Ontario Ltd. v. McMillan Binch, supra, where at [2004] O.J. No. 690 (Div. Ct.) she stated the following at paras. [4]-[7]:

[4] The decision does not expand the categories of persons who should be called on to fund an award of security for costs beyond those enumerated in the authorities. The motions judge considered the categories of shareholders, creditors and associates. Ultimately he concluded that Louis Quattrociocchi and CCRA “stand to benefit from the action and it has not been shown that they could not arrange to provide funding for security for costs in this case”.

[5] There was no error in considering the potential benefit to CCRA and its assets in determining this motion. With respect to shareholders and associates, the motions judge concluded that the plaintiffs had not demonstrated that they were incapable of raising the necessary funds. There was evidence to support his conclusions that the plaintiffs, through shareholders and creditors, had substantial assets to fund security for costs.

[6] Therefore, I am not satisfied that there is good reason to doubt the correctness of his decision, as he exercised his discretion on the proper principles and on the basis of the evidence before him. Similarly, he considered the reason for the delay in bringing the motion and then exercised his discretion to make the order for security for costs to cover all the costs of the proceeding.

[7] In any event, even if there were reason to doubt the correctness of the decision, this appeal does not raise a matter of general importance that goes beyond the interests of the parties. The decision turns on the facts of this case.

[8] The application for leave to appeal is dismissed. If the parties cannot agree as to the quantum of costs they may briefly do so in written submissions within 10 days of the release of this decision.

Then J.

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