CITATION: Nexgen v. Podgorniak, 2020 ONSC 22
COURT FILE NO.: 19-69-00
DATE: 2020 01 06
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
RE: Nexgen Power Ltd.
Plaintiff/Respondent
AND:
Bogdan A. Podgorniak carrying on business as PSE Engineering Solutions
Defendant/Appellant
BEFORE: Ricchetti J.
COUNSEL: D. Windrim for the Appellant
H. Lastman for the Respondent
HEARD: December 20, 2019
ENDORSEMENT
THE MOTION
[1] Nexgen Power Ltd. (“Nexgen”) brings this motion seeking an order that Bogdan A. Podgorniak (“Podgorniak”) post security for costs in the amount of $22,093.79.
THE FACTS
[2] On March 25, 2015, Podgorniak executed a promissory note in favour of Nexgen.
[3] On September 28, 2015, Podgorniak made a partial repayment to Nexgen in the amount of $2,500 with "the remainder to come asap".
[4] On the same day, September 28, 2015, Podgorniak made a second partial payment to Nexgen of $2,500 with "the additional payments will come as soon as I collect some for the bridge contract or any other money. Thank you again for having helped me out."
[5] On November 18, 2015, Podgorniak made a further partial payment to Nexgen of $1,000.
[6] There were discussions between the parties over the next several years. Eventually, Podgorniak failed to pay the balance owing under the Promissory Note.
[7] Nexgen commenced a claim on February 17, 2018. The claim seeks payment of the balance under the Promissory Note.
[8] Podgorniak filed a defence on March 18, 2018. Essentially, Podgorniak alleged that he and Nexgen had had prior dealings (on what was described as the Puslinch Project) going back to 2011. Podgorniak alleged Nexgen was to pay Podgorniak when it received payment from the owner/contractor. Nexgen settled on the Puslinch Project in December 2014. As a result, Nexgen owed Podgorniak monies. The amount allegedly owed by Nexgen to Podgorniak was approximately the same amount claimed by Nexgen under the Promissory Note. Essentially, the sole defence advanced was set-off of a debt previously allegedly owed by Nexgen to Podgorniak.
[9] The trial was heard on July 8, 2019 before Deputy Judge Collinson. Deputy Collinson delivered oral reasons for granting judgment to Nexgen in the amount of $9,000 plus pre-judgment interest and costs.
[10] The Deputy Judge rejected Podgorniak's allegations that he was owed money from Nexgen for the following reasons:
It strikes the court as particularly difficult to accept that a defendant would sign and enter into a promissory note with the expectation that he was to pay back $15,000 if there was a valid debt outstanding and owing to him from some years ago that was never honoured by the plaintiff.
If that had been the case and the parties were friends, as they indicated they were, it would certainly be expected that rather than advancing a loan for $15,000 the plaintiff would be honouring the obligation that was outstanding at the time and one would have expected that the defendant would have insisted on that form of recourse....
I do note that the defendant has not brought a cross-claim for any bills that are outstanding.....
This appears to be a simple case of a promissory note that was not honoured and the subsequent attempt to justify the dishonoring of that debt.
[11] On July 22, 2019, Podgorniak filed a Notice of Appeal alleging that the Deputy Judge had "misapplied" the laws of evidence, the law and the equities. There were no details of the errors alleged.
[12] On November 1, 2019, Nexgen brought this motion. The motion was returnable on November 14, 2019 but could not be heard that day due to the court's busy docket. The motion was adjourned to December 6, 2019. The appeal had not been perfected by Podgorniak. On December 6, 2019, the court ordered that Podgorniak perfect the appeal and pay costs of that day ($1,500) on or before December 17, 2019 failing which the appeal could be struck by the motions judge on December 20, 2019, the new return date for Nexgen's motion.
[13] I am not satisfied that Podgorniak has complied with the December 6, 2019 order as the reasons of D.J. Collinson (were not in the court file as ordered to be filed). However, I will proceed to deal with Nexgen’s motion on its merits.
[14] On November 28, 2019, Podgorniak filed a responding record to the motion. Essentially, Podgorniak sets out additional documents and facts which Podgorniak alleges entitle him to the set off claimed in this action. Whether these are additional allegations of facts (or in some cases arguments) and additional documents, that were advanced before the Deputy Judge are unclear as this court does not have the transcript of the trial proceedings before it. Nexgen submits that these are additional documents and facts not admissible on the appeal as failing to comply with the Palmer test for fresh evidence.
[15] Two paragraphs in Podgorniak's affidavit (paras. 21 and 22) are significant to this motion:
Further, I would like to ask the Honourable Court to recognize that based on the fact that I reside in Ontario, I work in Ontario, I own assets in Ontario, I am a Professional licensed to practice in Ontario and that I am an individual and not a shell corporation, the Respondent's allegations that I am impecunious and implausible are not justified.
While due to the not-at-fault auto accident suffered from injuries and have temporary reduced earnings, which threw me temporarily out of balance, I maintain part-time professional/design activities to maintain my licensed professional business without jeopardising it future.
[16] Then, despite the fact Nexgen’s motion had been adjourned on several occasions, Podgorniak filed an Amended Notice of Appeal on December 16, 2019. Now Podgorniak added the following to his grounds of appeal
a) The Deputy Judge was biased or demonstrated a reasonable apprehension of bias;
b) The Deputy Judge demonstrated a pattern of not addressing evidence, misstating evidence or misinterpreting evidence;
c) The Deputy Judge failed to consider the evidence and argument of Podgorniak;
d) The Deputy Judge should have recognized that there was a "construction trust" on amounts paid relating to the Puslinch project years earlier;
e) Podgorniak signed the Promissory Note under duress; and
f) The Deputy Judge's inconsistent use of collateral information.
[17] A number of these allegations relate to issues which were not the subject of Podgorniak’s defence, not the subject of evidence and not the subject of argument at trial.
THE POSITION OF THE PARTIES
[18] Nexgen submits that security for costs should be ordered in this case.
[19] Podgorniak submits that the motion be dismissed and the appeal proceed.
THE ANALYSIS
[20] Rule 61.06(1) of the Rules of Civil Procedure provides:
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
(c) for other good reason, security for costs should be ordered,
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.
[21] Rule 56.01(1) of the Rules of Civil Procedure provides:
(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,
(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;
(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;
(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 applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or
(f) a statute entitles the defendant or respondent to security for costs.
[22] In Yaiguaje v. Chevron Corp., 2017 ONCA 827, the Court of Appeal stated that an order for security for costs should only be made where the justness of the case demands it:
23 The Rules explicitly provide that an order for security for costs should only be made where the justness of the case demands it. Courts must be vigilant to ensure an order that is designed to be protective in nature is not used as a litigation tactic to prevent a case from being heard on its merits, even in circumstances where the other provisions of rr. 56 or 61 have been met.
24 Courts in Ontario have attempted to articulate the factors to be considered in determining the justness of security for costs orders. They have identified such factors as the merits of the claim, delay in bringing the motion, the impact of actionable conduct by the defendants on the available assets of the plaintiffs, access to justice concerns, and the public importance of the litigation. See: Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119 (H.C.); Morton v. Canada (Attorney General) (2005), 2005 6052 (ON SC), 75 O.R. (3d) 63 (S.C.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 2009 46451 (ON SC), 99 O.R. (3d) 55 (S.C.); Wang v. Li, 2011 ONSC 4477 (S.C.); and Brown v. Hudson's Bay Co., 2014 ONSC 1065, 318 O.A.C. 12 (Div. Ct.).
25 While this case law is of some assistance, each case must be considered on its own facts. It is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness of a security for costs order. There is no utility in imposing rigid criteria on top of the criteria already provided for in the Rules. The correct approach is for the court to consider the justness of the order holistically, examining all the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.
(emphasis added)
[23] Master McGraw in Kerlow v. Corrigan, 2019 ONSC 5181 summarized the following approach on motions for security for costs:
[27] I recently summarized the law on security for costs in Canadian Metal Buildings Inc. v. 1467344 Ontario Limited. The law on security for costs was also summarized by J.R. Henderson J. in 2311888 Ontario Inc. v. Ross, 2017 ONSC 1295 at para. 17 and Master Muir in 2179548 Ontario Inc. v. 2467925 Ontario Inc. [2017] O.J. No. 246 at para. 8.
[28] The initial onus is on the defendants to show that the plaintiff falls within one of the four enumerated categories in Rule 56.01. If the defendant meets the initial onus, the plaintiff can rebut the onus and avoid security for costs by showing that they have sufficient assets in Ontario or a reciprocating jurisdiction to satisfy a costs order; the order is unjust or unnecessary; or the plaintiff should be permitted to proceed to trial despite its impecuniosity should it fail (see Travel Guild Inc. v. Smith, 2014 CarswellOnt 19157 (S.C.J.) at para.16; Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (ONSC) at para. 7; Cobalt Engineering v. Genivar Inc., at para. 16).
[29] Master Glustein (as he then was) summarized the applicable principles at paragraph 7 of Coastline:
“7 I apply the following legal principles:
(i) The initial onus is on the defendant to satisfy the court that it "appears" there is good reason to believe that the matter comes within one of the circumstances enumerated in Rule 56.01 (Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119 (H.C.J.) at 123);
(ii) Once the first part of the test is satisfied, "the onus is on the plaintiff to establish that an order for security would be unjust" (Uribe v. Sanchez (2006), 33 C.P.C. (6th) 94 (Ont. S.C.J. - Mast) ("Uribe") at para. 4);
(iii) The second stage of the test "is clearly permissive and requires the exercise of discretion which can take into account a multitude of factors". The court exercises a broad discretion in making an order that is just (Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175 (S.C.J.) at para. 12; Uribe, at para. 4);
(iv) The plaintiff can rebut the onus by either demonstrating that:
(a) the plaintiff has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation,
(b) the plaintiff is impecunious and that justice demands that the plaintiff be permitted to continue with the action, i.e. an impecunious plaintiff will generally avoid paying security for costs if the plaintiff can establish that the claim is not "plainly devoid of merit", or
(c) if the plaintiff cannot establish that it is impecunious, but the plaintiff does not have sufficient assets to meet a costs order, the plaintiff must meet a high threshold to satisfy the court of its chances of success (See Willets v. Colalillo, [2007] O.J. No. 4623 (S.C.J. - Mast.) at paras. 46, 47, and 55; Uribe, at para. 5; Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at para. 50; Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP, [2007] O.J. No. 4096 (S.C.J. - Mast.) ("Bruno") at para. 35);
(emphasis added)
Has Nexgen shown that this case falls within one of the enumerated areas where security for costs can be ordered?
Frivolous Appeal
[24] The first question is whether there is good reason to believe that Podgorniak’s appeal is frivolous.
[25] In the case of Szpakowski v. Kramer, 2012 ONCA 77, the court noted:
It is not necessary for these purposes that we be satisfied the appeal is in fact without merit and frivolous, vexatious or otherwise an abuse of the process. It is sufficient if it appears to us that there is good reason to believe it has those characteristics. As this Court noted in Schmidt v. Toronto-Dominion Bank (1995), 24 O.R. (3d) (ON CA),1, at p. 5:
The words “good reason to believe” qualify the words “frivolous and vexatious” and indicate a finding short of an actual determination that the appeal is frivolous and vexatious. A judge hearing a motion for security for costs may reach the tentative conclusion that an appeal appears to be so devoid of merit as to give “good reason to believe that the appeal is frivolous and vexatious” without being satisfied that the appeal is actually devoid of merit.
[26] I have no hesitation in concluding that there is good reason to believe that Podgorniak's appeal is frivolous - that it is readily recognizable as devoid of merit for the following reasons:
a) The Notice of Appeal and Amended Notice of Appeal appear to be nothing more than an attempt to re-argue the trial. Bald statements of alleged appealable errors are made. No further particulars were articulated on this motion;
b) The Notice of Appeal and Amended Notice of Appeal do not disclose an error of law. In fact, there is good reason to conclude, based on Podgorniak's own evidence, that the alleged debt upon which he claims set off, is statute barred by the Limitations Act;
c) The Notice of Appeal and Amended Notice of Appeal do not disclose a palpable and overriding error of fact. It was open to the Deputy Judge to find that the acknowledge Promissory Note, upon which Podgorniak made three partial payments, remained unpaid in the principle amount of $9,000 and at the same time reject the alleged claim by Podgorniak of a "set off" indebtedness. Besides, as stated by the Deputy Judge, Podgorniak did not advance his own claim for the alleged set off debt;
d) Podgorniak's counsel on this motion refers to the "construction trust" as an error of law. However, Podgorniak’s counsel admitted that "construction trust" was not pleaded, argued or that there were sufficient facts at trial to establish such a trust;
e) Podgorniak's counsel made no submission regarding the Deputy Judge's alleged bias or apprehension of bias. I see no basis for this allegation in the motion record before me;
f) Aside from a bald allegation that Podgorniak signed the Promissory Note under duress, this was not pleaded in the defence and there is no evidence that duress was established or even argued at trial by Podgorniak.
Insufficient assets to pay a cost award
[27] Now let me turn to whether the Respondent has shown the Appellant has insufficient assets to pay a cost award.
[28] The evidence on this motion discloses that:
a) The Deputy Judge found that Podgorniak raised defences to avoid paying the balance on the Promissory Note;
b) Podgorniak’s earning are temporarily limited due to an accident, but there is no detail or time period set out in the materials;
c) Podgorniak brought a motion on July 24, 2019 to stay enforcement of the Judgment on the basis that "the attempts of any garnishment or any other means of enforcement would only create additional damages to my financial scores caused already by necessity to use credit to supplement my currently limited earnings influence by consequences of a car accident which took place on 30 December 2018." Podgorniak subsequently abandoned this motion. However, Nexgen points to the statement regarding Podgorniak’s impecuniosity;
d) Podgorniak makes bald statements that he has assets in Ontario to satisfy a cost award and is not impecunious. However, there is no detail or substantiation as to Podgorniak’s income or equity in any assets; and
e) Podgorniak states that a security for cost award would "stop me from having any access to justice and have [my] appeal heard and determined on its merits". The implication in this statement is that Podgorniak does not have funds to currently pay security for costs, which raises concerns that he would not have sufficient funds to pay a cost award should he lose the appeal.
[29] I am satisfied that the Respondent has demonstrated there is good reason to believe Podgorniak does not have sufficient assets to pay a cost award at trial.
Has Podgorniak shown that it would be unjust to make such an order?
[30] The onus now shifts to Podgorniak to establish that an order for security would be unjust. (see Coastline, citing Uribe v. Sanchez (2006), 33 C.P.C. (6th) 94 (Ont. S.C.J. - Mast) (“Uribe”).
[31] The second stage of the test "is clearly permissive and requires the exercise of discretion which can take into account a multitude of factors". The court exercises a broad discretion in making an order that is just (Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175 (S.C.J.) at para. 12; Uribe, at para. 4).
[32] Podgorniak can rebut the onus by demonstrating that:
(a) he has sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation;
(b) he is impecunious and that justice demands that he be permitted to continue with the action. Impecunious plaintiffs will generally avoid paying security for costs if they can establish that their claim is not "plainly devoid of merit"; or
(c) if the plaintiffs cannot establish that they are impecunious, but they do not have sufficient assets to meet a costs order, they must meet a higher threshold to satisfy the court of their chances of success. See Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at para. 50.
[33] Considering all the evidence on this motion, there is no evidence to support that making a security for cost order in this case would be unjust on any of the above grounds.
[34] Podgorniak relies heavily on Brown v. Hudson’s Bay Company, 2014 ONSC 1065. I am not persuaded that this authority assists Podgorniak. The Brown case was a motion for leave to appeal. It did not alter or clarify the law or test on a security for costs motion but was based on unusual facts. In addition, counsel did not provide me with a copy of the Divisional Court’s decision on this authority. In any event, the authorities set out above include more recent and authorities of a higher court.
[35] I am satisfied it is just to order security for costs in this case.
Quantum
[36] The Respondent seeks security for costs in the amount of $22,093.79. The affidavit in support of the motion seeks security for costs in the amount of $12,093.79 (see para. 28).
[37] The Respondent's motion materials do not disclose how this amount was arrived at.
[38] I am satisfied that $7,500 is a reasonable amount for security for costs given the issues and materials involved in the appeal.
CONCLUSION
[39] Podgorniak shall post security for costs of the appeal with the Accountant of the Superior Court of Justice, to the credit of this action, the amount of $7,500 on or before February 6, 2020.
[40] To be clear, Podgorniak's obligation to pay the costs of $1,500 ordered on December 6, 2019 remain due and payable directly to Nexgen forthwith, unless same has already been paid.
COSTS
[41] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 3 pages, with attached Costs Outline and any authorities.
[42] Any responding party shall have one week thereafter to serve and file responding submissions. Written submissions shall be limited to 3 pages with any authorities relied on attached.
[43] There shall be no reply submissions without leave.
Ricchetti J.
Date: January 6, 2020
CITATION: Nexgen v. Podgorniak, 2020 ONSC 22
COURT FILE NO.: 19-69-00
DATE: 2020 01 06
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
RE: Nexgen Power Ltd., Plaintiff/Respondent
AND:
Bogdan A. Podgorniak carrying on business as PSE Engineering Solutions, Defendant/Appellant
COUNSEL: D. Windrim for the Appellant H. Lastman for the Respondent
ENDORSEMENT
Ricchetti J.
Released: January 6, 2020