Crudo Creative Inc. v. Marin et al. [Indexed as: Crudo Creative Inc. v. Marin]

90 O.R. (3d) 213

Ontario Superior Court of Justice,

Divisional Court,

Cunningham A.C.J., Meehan and Hill JJ.

November 11, 2007 *

• This judgement was recently brought to the attention of the editors

Civil procedure -- Costs -- Security for costs -- Motion judge erring in failing to consider whether corporate plaintiff had access through its shareholder to means to post security for costs.

The plaintiff corporation was suing the defendants for damages in the approximate amount of $180,000 for unpaid invoices rendered for creative and design work. The defendants brought an unsuccessful motion for security for costs pursuant to rule 56.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The motion judge found that an order for security for costs would entirely defeat the plaintiff's right to seek a remedy. The defendants appealed.

Held, the appeal should be allowed. [page214]

On the evidence, the plaintiff was impecunious only in the narrow and limited sense that it was inactive and without assets. However, evidence of financial difficulties does not necessarily equate with impecuniosity. The key question was whether the plaintiff had access to assets or funds. It was not established by compelling evidence that the plaintiff did not have access through its shareholder to the means to post security for costs. There was no evidence of unsuccessful attempts by the plaintiff to borrow or raise funds. The plaintiff was not impecunious in the extended sense. While it could not realistically be said that the action was plainly devoid of merit, the record did not suggest anything approaching a certainty of success. Considering the financial circumstances of the plaintiff and the nature of its claim, security for costs should be ordered, but not in the full estimated amount. The plaintiff was ordered to post $50,000 in two instalments of $25,000 each.

APPEAL from an order of Keenan J. dated September 2, 2005, dismissing a motion for security for costs.

Cases referred to 1056470 Ontario Inc. v. Goh (1997), 1997 12255 (ON SC), 34 O.R. (3d) 92, [1997] O.J. No. 2545, 32 O.T.C. 225, 13 C.P.C. (4th) 120, 72 A.C.W.S. (3d) 36 (Gen. Div.); 1465778 Ont. Inc. v. 1122077 Ont. Ltd., [2005] O.J. No. 5185, 144 A.C.W.S. (3d) 35 (C.A.); 671122 Ontario Ltd. v. Canadian Tire Corp. (1993), 1993 8606 (ON CA), 15 O.R. (3d) 65, [1993] O.J. No. 2173, 107 D.L.R. (4th) 207, 66 O.A.C. 1, 20 C.P.C. (3d) 392, 42 A.C.W.S. (3d) 793 (C.A.); ABI Biotechnology Inc. v. Apotex Inc., 2000 27027 (MB CA), [2000] M.J. No. 14, [2000] 3 W.W.R. 217, 142 Man. R. (2d) 80, 94 A.C.W.S. (3d) 242 (C.A.); Better Business Bureau of Metropolitan Toronto Inc. v. Tuz, [1999] O.J. No. 2001 (Div. Ct.); Bodnar v. Blackman (2006), 2006 31803 (ON CA), 82 O.R. (3d) 423, [2006] O.J. No. 3675, 275 D.L.R. (4th) 536, 215 O.A.C. 85, 32 R.F.L. (6th) 236, 151 A.C.W.S. (3d) 261 (C.A.); Buraglia v. New Brunswick Research and Productivity Council, 1995 6869 (NB CA), [1995] N.B.J. No. 177, 161 N.B.R. (2d) 197, 33 C.P.C. (3d) 213, 54 A.C.W.S. (3d) 855 (C.A.); Cabot v. Mikkelson, [2004] M.J. No. 240, 2004 MBCA 107, 242 D.L.R. (4th) 279, [2004] 10 W.W.R. 257, 187 Man. R. (2d) 104, 3 R.F.L. (6th) 269, 132 A.C.W.S. (3d) 321; Canadian Broadcasting Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd., 2002 44954 (ON CA), [2002] O.J. No. 2125, 160 O.A.C. 72, 214 D.L.R. (4th) 121, 26 B.L.R. (3d) 180, 35 C.B.R. (4th) 198, 114 A.C.W.S. (3d) 656 (C.A.); Design 19 Construction Ltd. v. Marks, [2002] O.J. No. 1091, [2002] O.T.C. 180, 22 C.P.C. (5th) 117, 115 A.C.W.S. (3d) 27 (S.C.J.); Di Paola (Re) (2006), 2006 37117 (ON CA), 84 O.R. (3d) 554, [2006] O.J. No. 4381, 217 O.A.C. 95, 26 C.B.R. (5th) 133, 37 C.P.C. (6th) 286, 152 A.C.W.S. (3d) 800 (C.A. (Chambers)); Diamond Auto Collision Inc. v. Economical Insurance Group, [2007] O.J. No. 2551, 2007 ONCA 487, 227 O.A.C. 51, 50 C.C.L.I. (4th) 213, 159 A.C.W.S. (3d) 281; Fat Mel's Restaurant v. Canadian Northern Shield Insurance Co., 1993 1669 (BC CA), [1993] B.C.J. No. 507, 25 B.C.A.C. 95, 76 B.C.L.R. (2d) 231, 38 A.C.W.S. (3d) 1102 (C.A.); Han Holdings Ltd. v. MCG Opportunities Fund Ltd., [2005] O.J. No. 1183, [2005] O.T.C. 219, 138 A.C.W.S. (3d) 29 (S.C.J.); J.L. v. Montfils, 2004 11299 (ON CA), [2004] O.J. No. 179, 181 O.A.C. 239, 44 C.P.C. (5th) 66, 128 A.C.W.S. (3d) 498 (C.A. (Chambers)); John Wink Ltd. v. Sico Inc. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, [1987] O.J. No. 5, 15 C.P.C. (2d) 187, 2 A.C.W.S. (3d) 323 (H.C.J.) [Leave to appeal to Div. Ct. granted [1987] O.J. No. 2318, 22 C.P.C. (2d) 311, 4 A.C.W.S. (3d) 3 (H.C.J.)]; Kallaba v. Bylykbashi, 2006 3953 (ON CA), [2006] O.J. No. 545, 207 O.A.C. 60, 265 D.L.R. (4th) 320, 23 R.F.L. (6th) 235, 145 A.C.W.S. (3d) 879 (C.A.) [Leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 144]; Keephills Aggregate Co. Ltd. v. Parkland (County of) Subdivision and Appeal Board, [2003] A.J. No. 1017, 2003 ABCA 242, 348 A.R. 41, 2 C.E.L.R. (3d) 227, 42 M.P.L.R. (3d) 28, 125 A.C.W.S. (3d) 520 (Chambers); Kurzela v. 526442 Ontario Ltd. (1988), 1988 4663 (ON SC), 66 O.R. (2d) 446, [1988] O.J. No. 1884, 31 O.A.C. 303, 32 C.P.C. (2d) 276, 12 A.C.W.S. (3d) 297 (Div. Ct.); Lawson v. Lawson (2006), 2006 26573 (ON CA), 81 O.R. (3d) 321, [2006] O.J. No. 3179, 214 O.A.C. 94, 29 R.F.L. (6th) 8, 150 A.C.W.S. (3d) 422 (C.A.); Martel v. Martel, [2003] S.J. No. 341, 2003 SKCA 47, 49 R.F.L. (5th) 155, 123 A.C.W.S. (3d) 330; [page215] Petrowski v. Waskul, [2003] M.J. No. 151, 2003 MBCA 65, [2003] 10 W.W.R. 65, 173 Man. R. (2d) 237, 122 A.C.W.S. (3d) 733; Puma Canada Inc. v. Macaw Holdings Inc., [2003] O.J. No. 4660, [2003] O.T.C. 1021, 127 A.C.W.S. (3d) 38 (S.C.J.); Rhonmont Properties Ltd. v. Yeadon Manufacturing Ltd., [2003] O.J. No. 1883 (C.A.); Smallwood v. Sparling, (1983), 1983 1930 (ON SC), 42 O.R. (2d) 53, [1983] O.J. No. 3048, 34 C.P.C. 24 at 29, 20 A.C.W.S. (2d) 55 (H.C.J.); Smith Bus Lines Ltd. v. Bank of Montreal (1987), 1987 4190 (ON SC), 61 O.R. (2d) 688, [1987] O.J. No. 1197, 25 C.P.C. (2d) 255 (H.C.J.) [Leave to appeal to Div. Ct. refused (1987), 61 O.R. (2d) 688n (Div. Ct.)); Superior Salmon Farms Ltd. v. Corey Feed Mills Ltd., 1991 5688 (NB KB), [1991] N.B.J. No. 500, 115 N.B.R. (2d) 265, 27 A.C.W.S. (3d) 174 (Q.B.); Warren Industrial Feldspar Co. Ltd. v. Union Carbide Canada Ltd. (1986), 1986 2683 (ON SC), 54 O.R. (2d) 213, [1986] O.J. No. 2364, 8 C.P.C. (2d) 1 (H.C.J.); Young v. Young (2003), 2003 3320 (ON CA), 63 O.R. (3d) 112, [2003] O.J. No. 67, 223 D.L.R. (4th) 113, 168 O.A.C. 186, 34 R.F.L. (5th) 214, 119 A.C.W.S. (3d) 448 (C.A.)

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 56.01

D.J. Brown, for respondent. S. Mannella, for appellants.

HILL J.: -- Introduction

[1] The appellants are the defendants in an action commenced by Crudo Creative Inc. ("Crudo") in which the respondent is seeking to recover the amount of about $180,000 against the appellants, jointly and severally, for unpaid work claimed to have been performed on behalf of Pre-Press Creative & Design Inc. ("Pre-Press").

[2] The appellants brought an unsuccessful motion for security for costs pursuant to rule 56.01(d) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. On November 17, 2005, Lack J. granted leave to appeal stating in part:

On the motion, there was no issue that the plaintiff is a corporation and has insufficient assets in Ontario to pay the costs of the defendants. One of the live issues was whether the sole shareholder o the plaintiff could raise the funds to post security. There was some evidence on the motion about his financial circumstances but he never alleged he was impecunious.

There is no analysis or finding in the reasons about the sole shareholder's ability to raise funds to post security. This is important because as sole shareholder he will benefit from any judgment and secondly in this case the plaintiff has joined the offices of the corporate defendant as defendants. It is [page216] entirely a case of "Heads I win, tails you lose" if the shareholder is not impecunious, but that issue is not dealt with in the reasons despite the reasoning in such cases as: Design 19 Construction Ltd. v. Marks, [2002] O.J. No. 1091 and the cases referred to therein. In my view, the appeal is important. It is important to the parties in the sense of not being trivial. It is also of wider importance given the number of cases in which corporate entities with no or few assets are plaintiffs. Leave to appeal granted for these reasons.

[3] For the reasons which follow, the appeal is allowed.

Overview of the Evidence

[4] The respondent, as plaintiff in the action, claims damages for unpaid invoices rendered to Pre-Press for creative and design work allegedly ordered by the appellants. The appellants deny the existence of any agreement for the supply of services and the provision of the services described in the Crudo invoices. The appellants have counterclaimed for loss of revenue and damage to goodwill on account of projects not completed on time by the respondent or in accordance with instructions.

[5] By 2001, the respondent corporation was sharing space at the same premises as Pre-Press Creative & Design Inc. Mario Crudo was the owner and sole shareholder of the respondent. According to Mr. Crudo, during 2001 and into the summer of 2002, the respondent performed creative and design work primarily on behalf of the appellants. The majority of the work the respondent claims to have performed on the appellant's behalf is said to have been undertaken between April and December 2001, with all its invoices dated September 3, 2002. Repeated requests for payment went unanswered.

[6] The appellants, as said, deny the existence of any agreement for the respondent to undertake creative and design work on its behalf. The appellants deny receipt in 2002 of the invoices dated September 3, 2002. On the appellants' version of events, an April 3, 2003 letter demanding about $180,000 was their first knowledge of the respondent's claim. According to the appellants, an April 16, 2003 request for particulars of the work allegedly performed went unanswered until September 10, 2003.

[7] The appellants point to this delay and the absence of any reference to additional receivables or bad debts in the respondent's financial statements as evidencing the illegitimacy of the respondent's claim. The respondent, through Mr. Crudo, maintains that it could not afford to pay the GST referable to the invoices in 2001 and 2002 without the prospect of the appellants paying for the work performed. [page217]

[8] In the summer of 2002, Mr. Crudo moved from the shared premises to become involved in Raw Integrated Inc. ("RAW") which was incorporated May 6, 2002. He owns half the shares of RAW for which he does creative and design work. In 2005, Mr. Crudo received about $1,000 weekly for this work.

[9] The financial statements of the respondent show it to be in a financial deficit and inactive. Mr. Crudo considers the respondent's trade name and goodwill to have value.

[10] Mr. Crudo's home is extensively mortgaged, he has a leased motor vehicle, credit card debt, and has personally guaranteed a defaulted loan of $33,000.

[11] RAW's revenues in 2003 and 2004 were respectively $843,887 and $585,807. Although RAW incurred a loss position in 2004, the company had been growing and had active clients. In 2004, RAW's wages and benefits expenses nearly doubled.

[12] Mr. Crudo has an unsecured line of credit, some mortgage-free equity in his home, and has paid down over $20,000 on a loan over three years.

[13] The court was informed that counsel estimate a ten-day trial. Pleadings and examinations are complete. Mr. Mannella stated that the appellants have incurred about $23,000 in costs to date and that further costs to completion of a trial in this matter would be approximately $86,000.

The Reasons of the Motions Court Judge

[14] At paras. 1-3 of his endorsement, the learned motion judge summarized the positions of the parties:

Defendants move for an order for security for costs. Plaintiff says that the Plaintiff company and other related companies are without assets and unable to provide any security for costs. The Plaintiff says however that it has a good cause of action as the Plaintiff's present state of impecuniosity was brought about by the failure of the Defendants to meet their obligations to the Plaintiff as they came due. The Plaintiff says that the failure of the Defendants to make payments for work done had caused the Plaintiff to have to abandon its working premises and led to insolvency.

Defendant denies the Plaintiff's claim and asserts that it had not notice of the claim until commencement of the action.

Defendant asks that the Plaintiff be required to post security for costs. Plaintiff says that such requirement would disable the process of this action. Even an order for incremental security would effectively disable the Plaintiff because the Plaintiff would not be able to keep up with security orders brought on by protraction of the action.

[15] The court then cited the following passage from John Wink Ltd. v. Sico Inc. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, [1987] O.J. No. 5 (H.C.J.), at pp. 707-09 O.R.: [page218]

The onus lies on defendant to show that there is good reason to believe that the plaintiff has insufficient assets. Thereupon the onus passes to plaintiff to show either that it has sufficient assets, or that it should be permitted to proceed to trial in spite of the lack of them . . . . . . . .

Injustice would be even more manifest if the impoverishment of plaintiff were caused by the very acts of which plaintiff complains in the action ... The onus on plaintiff is therefore not to show that the claim is likely to succeed. It is merely to show that it is not almost certain to fail.

[16] Austin J. gave leave to appeal to the Divisional Court from the decision of Reid J. ([1987] O.J. No. 2318, 22 C.P.C. (2d) 311 (H.C.J.)) stating at paras. 6-8:

Reid J. on the appeal held that in the circumstances, the onus on the plaintiff was to show that its claim was not almost certain to fail. Putting it another way, he held that unless a claim is plainly devoid of merit, it should be allowed to proceed.

This appears to me to be an appreciably lighter burden than is implicit in the decision of Trainor J. in Warren Industrial Feldspar Co. v. Union Carbide Can. Limited (1986), 1986 2683 (ON SC), 54 O.R. (2d) 213.

While the amount in issue is relatively small, the question of the appropriate burden or onus is one which must be dealt with every day. I am therefore of the view that it is desirable that leave to appeal be granted.

[17] Apparently, the Wink appeal did not succeed when the matter settled as has been noted at: Buraglia v. New Brunswick Research and Productivity Council, 1995 6869 (NB CA), [1995] N.B.J. No. 177, 161 N.B.R. (2d) 197 (C.A.), at para. 4; Smith Bus Lines Ltd. v. Bank of Montreal (1987), 1987 4190 (ON SC), 61 O.R. (2d) 688, [1987] O.J. No. 1197, 25 C.P.C. (2d) 255 (H.C.J.), at para. 43, leave to appeal to Div. Ct. refused (1987), 61 O.R. (2d) 688n). Some have continued to note differences between the test espoused by Reid J. in Wink and the test described by Trainor J. in Warren Industrial: see for example, Better Business Bureau of Metropolitan Toronto Inc. v. Tuz, [1999] O.J. No. 2001 (Div. Ct.), at para. 1. On the motion, and again on appeal, the parties were in agreement that the test applied by the motion judge was correct. For the purposes of this appeal, I am prepared to accept that position.

[18] The remainder of the motion judge's reasons are as follows:

An order for security for costs would entirely defeat the right of the Plaintiff to seek a remedy. That right should not be readily defeated where a cause of action has been asserted.

Adequacy of Reasons for Decision

[19] In the present case, from review of the reasons of the motion judge, and as became evident during argument of the [page219] appeal, the adequacy of those reasons was a real issue in determining the court's pathway through conflicting evidence as to the plaintiff's impecuniosity.

[20] The duty to give reasons for a decision is an inherent aspect of judicial responsibilities: Bodnar v. Blackman (2006), 2006 31803 (ON CA), 82 O.R. (3d) 423, [2006] O.J. No. 3675, 275 D.L.R. (4th) 536 (C.A.), at p. 539 D.L.R.; Lawson v. Lawson (2006), 2006 26573 (ON CA), 81 O.R. (3d) 321, [2006] O.J. No. 3179 (C.A.), at para. 9.

[21] The sufficiency of reasons is assessed on a pragmatic and functional approach having regard to three rationales -- the importance of informing the unsuccessful party the reasons for having lost, maintaining confidence in the administration of justice system, and facilitating meaningful appellate review: Young v. Young (2003), 2003 3320 (ON CA), 63 O.R. (3d) 112, [2003] O.J. No. 67 (C.A.), at p. 118 O.R. These rationale apply to the work of application and motion judges: Bodnar, at pp. 539-42 D.L.R.; Cabot v. Mikkelson, [2004] M.J. No. 240, 2004 MBCA 107, at para. 36; Kallaba v. Bylykbashi, 2006 3953 (ON CA), [2006] O.J. No. 545, 207 O.A.C. 60 (C.A.), at para. 146; Martel v. Martel, [2003] S.J. No. 341, 2003 SKCA 47, at para. 3.

[22] A court's reasons, which need not be perfect or lengthy (Lawson, at paras. 9-10; Bodnar, at p. 542 D.L.R.) nor necessarily eloquent (Petrowski v. Waskul, [2003] M.J. No. 151, 2003 MBCA 65, at para. 13) and which need not refer to all aspects of the evidence or every point raised in the case (Canadian Broadcasting Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd., 2002 44954 (ON CA), [2002] O.J. No. 2125, 160 O.A.C. 72 (C.A.), at para. 64), should nevertheless be "sufficient to enable the general public" and a reviewing court "to know whether the applicable legal principles and evidence were properly considered": Canadian Broadcasting Corporation Pension Plan (Trustee of), at para. 64.

[23] Whether reasons permit meaningful review is a contextual one having regard to their purpose and taking into consideration a number of factors including the nature of the issues, the evidence and record of the proceeding, the positions and representations of the parties, implicit findings, and the extent to which the reason for the judge's conclusion is patent on the record: Diamond Auto Collision Inc. v. Economical Insurance Group, [2007] O.J. No. 2551, 2007 ONCA 487, at para. 12; Keephills Aggregate Co. Ltd. v. Parkland (County of) Subdivision and Appeal Board, [2003] A.J. No. 1017, 2003 ABCA 242), at para. 22. In some instances, the facts speak for themselves and the basis of the decision is self-evident. On other occasions, with review of the totality of record, the basis for a decision becomes apparent despite the brevity or absence of reasons. [page220]

[24] Some analysis of the relevant facts and legal principles, however brief, is ordinarily necessary: Petrowski, at para. 13. "Standing alone, conclusory and generic reasons, in the sense that they could apply equally to any other case, do not permit appellate review": Diamond, at paras. 12, 43. Reference to the governing caselaw precedent and a statement of satisfaction that the test has or has not been met amounts to conclusory reasons risking a reviewing court not having "confidence that all relevant considerations have been addressed": Young, at p. 118 O.R.

[25] As a general rule, an appellate court maintains a deferential posture toward a judge's findings and especially so with findings of fact unless there exists some palpable and overriding error. Undoubtedly, a tension exists between the right to adequate reasons and the need for appellate deference, but where an order or decision is made without adequate reasons"unless the reasons are implicit or patent on the record, an appellate court has no access to the underlying reasons ... and cannot afford it deference": Lawson, at para. 13; Bodnar, at p. 541 D.L.R.

[26] The brief reasons in this case record the positions of the parties, the Wink test interpreting rule 56.01, and provide a conclusory statement that security for costs would entirely defeat the respondent's right to seek a remedy. There is no analysis of the evidence relating to the respondent's ability, or lack thereof, to access funding through its shareholder or any related company in order to post security for costs. The assessment of the evidence leading to the equitable relief extended the respondent from security for costs is not apparent. In these circumstances, the reasons impede meaningful review and eliminate the deference ordinarily owed the primary fact-finder. This is not intended as a criticism of the motion judge given the well-recognized pressing demands on motions judges (Bodnar, at p. 542 D.L.R.; Petrowski, at para. 13) and in particular having regard to his presiding in a jurisdiction notorious for choked civil motions lists and inadequate judicial resources.

Analysis

[27] Rule 56.01(1)(d) reads as follows:

56.01(1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that, . . . . .

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or [page221] applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;

[28] Determining whether it is "just" to make an order for security for costs is not an onerous threshold: Puma Canada Inc. v. Macaw Holdings Inc., [2003] O.J. No. 4660, [2003] O.T.C. 1021 (S.C.J.), at para. 9. A balancing is essential with due regard to the purpose of affording defendants a reasonable measure of protection for their costs but also with regard to the potential impact on a plaintiff: 671122 Ontario Ltd. v. Canadian Tire Corp. (1993), 1993 8606 (ON CA), 15 O.R. (3d) 65, [1993] O.J. No. 2173 (C.A.), at p. 67 O.R. The court has always exercised a broad discretion in deciding whether security for costs is just in the circumstances: Smallwood v. Sparling (1983), 1983 1930 (ON SC), 42 O.R. (2d) 53, [1983] O.J. No. 3048 (H.C.J.), at pp. 56-57 O.R.; Warren Industrial Feldspar Co. Ltd. v. Union Carbide Canada Ltd. (1986), 1986 2683 (ON SC), 54 O.R. (2d) 213, [1986] O.J. No. 2364 (H.C.J.), at pp. 218, 220 O.R. While the standard of review on appeal ordinarily extends significant deference to the initial decision-maker (Warren Industrial, at p. 218 O.R.; Han Holdings Ltd. v. MCG Opportunities Fund Ltd., [2005] O.J. No. 1183, [2005] O.T.C. 219 (S.C.J.), at para. 11), the state of the reasons here and a consideration of the totality of the record do not warrant deference to the motion judge's conclusion.

[29] There was no dispute that on the record before the motions court there was good reason to believe the appellants established the respondent was a corporation with insufficient assets in Ontario to pay the costs of the appellants if Crudo was unsuccessful at trial. In these circumstances, the appellants had a prima facie right to security for costs.

[30] In response, the respondent made no attempt to demonstrate that it in fact had sufficient assets to meet potential costs obligations to the appellants should the action progress to its determination.

[31] As noted by Sutherland J. in Smith Bus Lines, at para. 43"The term 'impecuniosity' does not appear in the rule; it is a term introduced as part of the judicial gloss upon the rule" relating to security for costs. On the evidence, the respondent corporation is impecunious only in the narrow and limited sense that it is inactive and without assets. However"[e]vidence of financial difficulties does not necessarily equate with impecuniosity" to be able to post security for costs: Han Holdings Ltd., at para. 18.

[32] The key question here is whether the respondent has access to assets or funds: Di Paola (Re) (2006), 2006 37117 (ON CA), 84 O.R. (3d) 554, [2006] O.J. No. 4381 (C.A. (Chambers)), at para. 23 (whether assets "available to it to fund the appeal. Presumably, its appeal is being funded by some source outside of the company"); [page222] Rhonmont Properties Ltd. v. Yeadon Manufacturing Ltd., [2003] O.J. No. 1883 (C.A.), at para. 5 (corporation "not impecunious in the extended sense that the shareholders and principals of the corporation are unable to fund security for costs"); Burgalia, at para. 5 quoting Superior Salmon Farms Ltd. v. Corey Feed Mills Ltd., 1991 5688 (NB KB), [1991] N.B.J. No. 500, 115 N.B.R. (2d) 265 (Q.B.), at pp. 269-70 N.B.R. ("Obviously someone is prepared to finance the prosecution of the action. That person or persons should also be prepared to either provide security for the costs of the defendants in the event the claim fails or to establish that security cannot be raised."); Smith Bus Lines, at para. 43 (evidence that "amount of the security is not only not possessed by the plaintiff but is not available to it"); Han Holdings Ltd., at para. 18 ("There was evidence ... that certainly raised the possibility that Han had access to funds"); see also Kurzela v. 526442 Ontario Ltd. (1988), 1988 4663 (ON SC), 66 O.R. (2d) 446, [1988] O.J. No. 1884 (Div. Ct.), at pp. 447-48 O.R.; ABI Biotechnology Inc. v. Apotex Inc., 2000 27027 (MB CA), [2000] M.J. No. 14, [2000] 3 W.W.R. 217 (C.A.), at paras. 45-46; 1056470 Ontario Inc. v. Goh (1997), 1997 12255 (ON SC), 34 O.R. (3d) 92, [1997] O.J. No. 2545 (Gen. Div.), at pp. 95-96 O.R.

[33] A corporate plaintiff carries a significant burden of establishing direct and indirect impoverishment: Design 19 Construction Ltd. v. Marks, [2002] O.J. No. 1091, [2002] O.T.C. 180 (S.C.J.), at para. 8. Rule 56.01(d) and its equivalents are clearly intended to place corporate plaintiffs in a more vulnerable position than plaintiffs who are individuals: 671122 Ont. Ltd., at p. 67 O.R.; ABI Biotechnology, at paras. 34, 36, 45, 47; Fat Mel's Restaurant v. Canadian Northern Shield Insurance Co., 1993 1669 (BC CA), [1993] B.C.J. No. 507, 76 B.C.L.R. (2d) 231 (C.A.), at para. 27.

[34] On the record here, it has not been established by compelling evidence that the respondent does not have access through its shareholder to the means to post security for costs. In this sense, the respondent is not impecunious in the extended sense. There is no evidence of unsuccessful attempts by the respondent to borrow or raise funds. The respondent is funding its action and Mr. Crudo, owner and employee of a similar corporate entity, is on the totality of the evidence, far from indigent.

[35] While not essential to determination of the appeal, given the finding as to impecuniosity, I am of the view that no injustice, in the broader sense of unfair defeat or hindrance of the respondent's claim, is made out on the existing record. There is no evidence that the rule 56.01 motion was used in any oppressive way to stifle or block the respondent's action. Further, as to the merits of the claim, while the appellants submitted that their evidence on the motion raised doubts as to the strength of the respondent's [page223] case and its likelihood of success, it could not realistically be said that Crudo's action is "plainly devoid of merit" (J.L. v. Montfils, 2004 11299 (ON CA), [2004] O.J. No. 179, 181 O.A.C. 239 (C.A. (Chambers)), at para. 17; Puma Canada Inc., at para. 15) or frivolous or unfounded (1465778 Ont. Inc. v. 1122077 Ont. Ltd., [2005] O.J. No. 5185, 144 A.C.W.S. (3d) 35 (C.A.), at para. 3; Buraglia at paras. 6, 10). That said, the record does not cogently suggest anything approaching a certainty of success for the respondent.

Conclusion

[36] The court has a discretion, in furtherance of a balanced and just result, to order less than the requested amount of security. Considering the financial circumstances of the respondent and the nature of its claim against the appellants, I would not order posting of security in the full estimated amount.

[37] Security for costs is ordered by cash, bond or other security instrument satisfactory to the appellants, acting reasonably, in the following amounts and schedule. Twenty-five [thousand] ($25,000) within 60 days of this order and a further twenty-five thousand ($25,000) on or before March 3, 2008.

[38] The appellants are entitled to their costs of the leave application and this appeal. In the event counsel are unable to agree on the quantum of costs, the parties shall exchange and file brief written costs submissions within 30 days.

Appeal allowed.