CITATION: Midland Resources Holdings Limited v. Shtaif, 2023 ONSC 865
COURT FILE NO.: 311/22
DATE: 20230203
ONTARIO
SUPERIOR COURT OF JUSTICE
Divisional Court
BETWEEN:
MIDLAND RESOURCES HOLDINGS LIMITED
Plaintiff (Respondent) (Moving Party)
– and –
MICHAEL SHTAIF
Defendant (Appellant) (Responding Party)
Kenneth Prehogan, Kayla Theeuwen and Alfred Pepushaj, for Midland Resources Holdings Limited
Michael Shtaif, in person
HEARD: January 20, 2023, by Zoom
Schabas J.
REVISED SECURITY FOR COSTS DECISION
Overview
[1] Midland Resources Holdings Limited, a British Virgin Islands company (“Midland BVI” or “Midland”), the respondent in an appeal pending before this Court, moves for security for costs pursuant to Rule 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Midland submits, among other things, that the appeal is frivolous and vexatious and there is reason to believe that the appellant, Michael Shtaif (“Shtaif”), has insufficient assets to pay the costs of the appeal. Midland also submits that security for costs should be ordered “for other good reason”, relying on Shtaif’s history of abusing the court’s process. Midland also relies on factors in Rule 56.01, including that Shtaif is not ordinarily resident in Ontario, has no assets in Ontario, and that Shtaif is already subject to a judgment and costs orders in favour of Midland, which have not been paid.
[2] Shtaif takes issue with Midland’s standing to seek security as it is not a defendant in the underlying proceeding, and submits that Midland has brought this motion too late. He also argues that nothing is owing by him to Midland.
[3] For the reasons that follow, I grant the motion for security for costs. In my view an order for security for costs is just in the circumstances. There is “good reason to believe that the appeal is frivolous and vexatious” and that Shtaif “has insufficient assets in Ontario to pay the costs of the appeal” pursuant to Rule 61.06(1)(a). “Other good reason[s]” to order security for costs under Rule 61.01(1)(c) include the outstanding unpaid judgment and costs orders against Shtaif, and Shtaif’s history and ongoing abuse of the court process.
Background
[4] In 2014, following a 59-day trial, Sanderson J. found Shtaif liable to Midland Resources Holding Limited, a Guernsey corporation (“Midland Guernsey”), for $59,559,512.97. In reaching her conclusions, Sanderson J. found that Shtaif had committed numerous acts of dishonesty towards Midland Guernsey and others: Midland Resources Holding Limited v. Shtaif, 2014 ONSC 997, at paras. 945-1087 (the “Sanderson Judgment”). In 2017, the Ontario Court of Appeal reduced the damages awarded against Shtaif to $8,370,482.02 but left most of Sanderson J.’s findings of dishonesty against him intact: Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481.
[5] Shtaif and his co-defendant, Eugene Bokserman (“Bokserman”), brought two motions to the Court of Appeal seeking reconsideration. The motions were dismissed in January and September 2018. On the second motion for reconsideration, the Court of Appeal found that Shtaif and Bokserman had abused the court’s process. The Court of Appeal prohibited Shtaif and Bokserman from making further motions unless they obtained leave in that court first and paid Midland Guernsey’s costs of the appeal and of the first motion to reconsider: Midland Resources Holding Limited v. Shtaif, 2018 ONCA 743, 81 B.L.R. (5th) 191. An application for leave to appeal to the Supreme Court of Canada was dismissed with costs: Michael Shtaif, et al. v. Midland Resources Holding Limited, 2019 37485 (SCC).
[6] To date, Shtaif has made no payments as required by the Sanderson Judgment.
[7] In 2019, Midland Guernsey transferred its rights to collect and enforce the Sanderson Judgment to Midland BVI. As there may have been some irregularity in the assignment in 2019, it was repeated in February 2021 in Guernsey.
[8] Midland has sought to enforce the Sanderson Judgment against Shtaif in Alberta, where he now resides, and against Bokserman in Ontario. In a proceeding commenced in 2021, Midland sought to set aside what it alleged was a fraudulent conveyance of a property owned by Bokserman to his spouse made shortly after the Sanderson Judgment was released. Shtaif intervened in the proceeding, supporting Bokserman’s position that the assignment to Midland and certificates of judgment obtained for it were not valid, and therefore Midland had no status to enforce the Sanderson Judgment.
[9] Justice E.M. Morgan dismissed the arguments of Bokserman and Shtaif and granted judgment for Midland against Bokserman. Justice Morgan found Midland to be a proper plaintiff with standing to enforce the judgment under a valid assignment from the Royal Court of Guernsey: Midland Resources Holdings Ltd. v. Bokserman, 2021 ONSC 3077. Justice Morgan ordered Shtaif to pay $30,000 in costs to Midland: Midland Resources Holdings Ltd. v. Bokserman, 2021 ONSC 3762.
[10] The Ontario Court of Appeal dismissed Bokserman’s appeal of Morgan J.’s decisions on January 28, 2022: Midland Resources Holding Limited v. Bokserman, 2022 ONCA 73, leave to appeal denied, 2022 88703 (SCC). In an earlier decision ordering security for costs to be posted by Shtaif to proceed with his own appeal of Justice Morgan’s decision, Hourigan J.A. observed that “Bokserman and Shtaif have a history of abusing the court process, which suggests that they will take whatever steps they can, be they legitimate or illegitimate, to delay the enforcement of orders against them.” In concluding that an order for security for costs was “just in the circumstances”, Hourigan J.A. stated: “it is important to remember that these proceeding are focussed on the collection of judgments that have been outstanding for years, that nothing has been paid and that there is a history of fraudulent and abusive conduct”: (October 21, 2021), Toronto (Ont. C.A., M52729 (C69468) & M52727 (C69481)).
[11] Meanwhile, in this proceeding, while the appeals from Morgan J.’s judgment were pending, Shtaif served a motion to have the assignment and certificates of judgment issued to Midland declared unenforceable against him. Despite the Court of Appeal decision released in January 2022, Shtaif proceeded with his motion before Associate Justice Robinson on February 25, 2022.
[12] On May 26, 2022, Associate Justice Robinson dismissed Shtaif’s motion in its entirety: Midland Resources Holding Limited v. Shtaif, 2022 ONSC 3161 (the “Enforceability Decision”). He found, among other things, at paras. 6, 31, 40 and 62 that:
(a) “substantive justice favours Midland BVI in all the circumstances”;
(b) The motion was a collateral attack on the decisions of Justice Morgan and the Court of Appeal;
(c) there was no basis on which to set aside the certificates at issue, which accurately reflected the procedural history, the Sanderson Judgment, and the fact that Midland Guernsey had assigned the Sanderson Judgment to Midland BVI; and
(d) there was an undisputed assignment from Midland Guernsey to Midland BVI.
[13] On October 7, 2022, Associate Justice Robinson ordered Shtaif to pay Midland costs of the motion in the amount of $25,2781.21: Midland Resources Holding Limited v. Shtaif, 2022 ONSC 5709 (the “Costs Endorsement”).
[14] In the Costs Endorsement, Associate Justice Robinson stated at para. 22:
I agree with Midland BVI that Mr. Shtaif has demonstrated both an unwillingness to pay the judgment against him and an intention to delay its enforcement, including rehashing arguments and positions that he has previously raised in this and other courts. Midland BVI submits it is an abuse of process. I agree. Arguments made before me were previously made before Morgan J. and the Court of Appeal and rejected. I held that advancing the same arguments amounted to a collateral attack on those prior decisions. Mr. Shtaif's ongoing conduct in Ontario and Alberta is consistent with taking whatever procedural steps he can to avoid paying his judgment debt and outstanding costs awards. It is not conduct that the court should condone.
[15] Shtaif has appealed the Enforceability Decision but has not appealed the Costs Endorsement.
[16] Shtaif also continues to take other steps. In March 2022 he and Bokserman filed a motion in the Superior Court to set aside the Sanderson Judgment. However, that motion has not advanced as, in October 2022, the case management judge set a timetable to have the Court hear a motion by Midland to quash or stay the motion to set aside, and to have Shtaif and Bokserman declared vexatious litigants.
[17] On August 16, 2022, Shtaif purported to file a motion with this Court seeking, among other things, to adduce fresh evidence or, alternatively, an order staying the appeal to this Court of the Enforceability Decision pending Shtaif’s motion to set aside the Sanderson Judgment. Following a direction from this Court, Shtaif withdrew his motion, but he appears to have now renewed this request in a cross-motion contained in his responding record on this motion for security for costs. However, that cross-motion has not been scheduled and I am only addressing the motion for security for costs.
Midland has standing to seek security for costs
[18] Shtaif’s first objection, that Midland cannot seek security for costs because it is a plaintiff, not a defendant, has no merit. Shtaif relies on Rule 56.01, which provides that “[t]he court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just…” This means, Shtaif argues, that only a defendant or respondent can bring a motion for security for costs.
[19] Shtaif ignores two important points. First, this motion is brought under Rule 61.06, which deals specifically with security for costs on appeals and permits a respondent on an appeal to move for such an order, as Midland has done here.
[20] Second, even if Rule 56.01 applied, the term “respondent” is defined in Rule 1.03 to mean “a person against whom an application is made or an appeal is brought.” [emphasis added] Shtaif has brought this appeal against Midland which is a respondent on the appeal.
Midland’s motion is not too late
[21] Midland served its motion for security for costs on November 14, 2022, after Shtaif perfected his appeal on September 23, 2022. Shtaif complains that Midland should have moved sooner, before putting Shtaif to the effort of filing a record and preparing a factum.
[22] Shtaif is correct that delay is a factor in considering the justness of an order for security for costs, as was observed by Jamal J.A. (as he then was) in Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 6. But it is just one factor. Prejudice from the delay must also be considered: Trillium Motor World Ltd. v. General Motors of Canada Limited, 2016 ONCA 702, at para. 35.
[23] In this case, Shtaif has not adduced any evidence of prejudice arising from the delay other than that he has had to prepare the materials himself. He has not incurred any legal fees and, as counsel for Midland points out, his disbursements are minimal as the materials have been filed electronically, without the need for large photocopying expenses. Further, the delay should be reviewed in light of the outstanding unpaid costs orders, the history of the proceedings, and the findings by Associate Justice Robinson that Shtaif’s motion was a collateral attack on other recent judgments of the Superior Court and of the Court of Appeal. Given this history, I find Midland acted reasonably in not incurring costs of bringing this motion until it had confirmation that Shtaif would actually proceed with the appeal.
[24] As Jamal J.A. pointed out in Heidari, motions for security for costs are meant to provide “a measure of protection” to the respondent for the costs that will be incurred on the appeal. Although Midland has now served its factum, exhibit book, and compendium for the appeal, it will continue to incur costs in preparing for argument. Any delay by Midland in bringing this motion is outweighed by the justness of granting “a measure of protection” to Midland for the costs it must incur in responding to Shtaif’s appeal to this Court.
Security for costs should be ordered
Rule 61.06(1)(a) – frivolous and vexatious and insufficient assets
[25] Midland has satisfied me that “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” as set out in Rule 61.06(1)(a).
[26] A proceeding is vexatious where it is an attempt to relitigate a matter that has already been determined, or has no chance of success, or is brought for an improper purpose, including harassing, oppressing or frustrating other parties, and preventing a party from collecting on a judgment. Relevant factors in determining if a proceeding is vexatious include whether the litigant has failed to pay costs of prior proceedings or has persistently pursued unsuccessful appeals: see e.g., Re Lang Michener and Fabian (1987), 1987 172 (ON SC), 59 O.R. (2d) 353 (H.C.J.); Dobson v. Green, 2012 ONSC 4432; Howie, Sacks & Henry LLP et al. v. Wei Chen, 2015 ONSC 2501.
[27] Shtaif’s argument on the Enforceability Decision before Associate Justice Robinson was found to be a collateral attack on the decisions of Justice Morgan and the Court of Appeal. This appeal appears to be yet another attempt to avoid paying the Sanderson Judgment and to use and abuse the justice system to cause Midland to incur legal costs. Shtaif's appeal also appears to challenge findings of fact made by Associate Justice Robinson in his detailed, “facially sound reasons.” The Court of Appeal has held that “such appeals appear to have no merit”: Henderson v. Wright, 2016 ONCA 89; Schmidt v. Toronto Dominion Bank (1995), 1995 3502 (ON CA), 24 O.R. (3d) 1. In these circumstances, I have no difficulty concluding that there is good reason to believe that this appeal is frivolous and vexatious.
[28] In reaching this conclusion I have also considered Shtaif’s submission that the Alberta courts might be going in a different direction regarding the validity of the assignment by the Royal Court of Guernsey. However, as Associate Justice Robinson noted, at paras. 29-31 of his decision, the Ontario Court of Appeal has spoken on this issue in upholding Morgan J.’s determination of the issue in favour of Midland. Further, as the Ontario Court of Appeal stated, nothing in its decision “binds or precludes the Alberta courts from proceeding as they see fit”, and the same is true of the effect of Alberta decisions on this court: Bokserman 2022, at para. 41.
[29] There is also good reason to believe that Shtaif has insufficient assets in Ontario to pay Midland’s costs of the appeal before this court. Shtaif does not reside in Ontario, has paid nothing to anyone as ordered in various proceedings over the past decade. Had he any assets in Ontario, they likely would have come to light by now.
[30] Accordingly, I find that Midland has met its burden under Rule 61.06(1)(a). However, meeting the criteria does not create a right to security; rather, it “triggers an inquiry into the justness of the order sought”: York University v. Markicevic, 2017 ONCA 651, at para. 19. This includes taking into account a number of factors, including “the merits of the claim, the financial circumstances of the plaintiff and the possibility that an order for security may prevent a bona fide claim from proceeding”, recognizing that a judge has a “broad discretion” in “making such order as is just”: at para. 20. Put another way, the “determination requires 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”: at para. 22.
[31] In my view, the balancing here all favours Midland. Associate Justice Robinson found Shtaif’s motion to be without merit and an abuse of process. There is no evidence that Shtaif is impecunious or unable to proceed in the face of an order for security for costs. The history of the litigation between Midland and Shtaif supports the conclusion that, in the absence of an order for security, Midland is unlikely to recover its costs.
Rule 61.06(1)(c) – “other good reason”
[32] Justice Hourigan, in making an order for security for costs against Shtaif in October 2021, relied on Rule 61.06(1)(c). In his reasons, Hourigan J.A. stated that “[o]n a motion for security for costs, the overarching principle to be applied to all the circumstances is the justness of the order sought.” Justice Hourigan quoted from Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 22:
I n deciding motions for security for costs, judges are obliged to first consider the specific provisions of the Rules governing those motions and then effectively to take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront.
[33] Justice Hourigan was satisfied that an order for security for costs was just in all circumstances. This was based on the history of the litigation between the parties, including Shtaif’s failure to make any payments on the Sanderson Judgment, the lack of evidence of any assets to satisfy a costs award, the findings of fraud made by Sanderson J., and the history of abusing the court’s process.
[34] The same factors continue to apply today. Indeed, since Justice Hourigan’s order fifteen months ago, Shtaif appears to be continuing to abuse the process of the court by bringing collateral attacks on the decisions of the Court of Appeal and of Justice Morgan. He shows no intention or ability to pay anything to anyone. Accordingly, Midland has also satisfied me that an order for security for costs should be ordered under Rule 61.06(1)(c).
Rule 61.06(1)(b) – an order could be made against the appellant under rule 56.01
[35] In light of my conclusions under Rule 61.06(1)(a) and (c), it is not necessary for me to address whether an order could be made under Rule 56.01 via Rule 61.01(b). However, the facts also support an order under Rule 56.01. Shtaif is not ordinarily resident in Ontario, he has unpaid orders for costs against him in this and other proceedings, and there is good reason to believe that his appeal is frivolous and vexatious and that he has insufficient assets in Ontario to pay costs, if awarded. Shtaif has failed to adduce any evidence in response to suggest that an order for security for costs would be unjust, such as by demonstrating that he has assets in Ontario, or that he is impecunious or even experiencing any financial hardship: Zeitoun v. Economical Insurance Group, 2008 20996 (Div. Ct.), at paras. 45-50.
Quantum
[36] Midland seeks an order requiring Shtaif to post security for costs in the amount of $43,584.21. This amount includes an estimate of $18,306 in costs at a partial indemnity rate for the appeal, and the costs ordered by Associate Justice Robinson for the Enforceability Decision of $25,278.21, which were fixed on a substantial indemnity basis and ordered payable forthwith: Costs Endorsement, at para. 39.
[37] Pursuant to Rule 61.06(1), I have the power to include the amount ordered by Associate Justice Robinson on the motion below if I find it is just to do so. In Trillium Motor, at para. 17, the Court of Appeal confirmed that this meant an appellate judge has the discretion to award “security for costs for the trial as well as the pending appeal.”
[38] In my view, it is just in the circumstances of this case to include the costs ordered on the motion below in the order for security for costs. In his Costs Endorsement, Associate Justice Robinson agreed that the motion was an abuse of process. He also found that the conduct of the motion, including unsubstantiated allegations of deception against Midland, warranted costs on a substantial indemnity basis. These findings, together with my conclusion that an order for security for costs is justified on virtually all of the possible grounds set out in the Rules, support my conclusion.
[39] I also find that the request for security for costs of the appeal of $18,306, estimated on a partial indemnity basis, is reasonable.
Conclusion
[40] An order shall issue requiring Shtaif to post security for costs of $43,584.21 within 30 days of the release of these reasons, failing which the appeal shall be dismissed.
[41] Shtaif is also ordered to pay Midland $7,500 in costs, all inclusive, for this motion.
Paul B. Schabas J.
Released: February 03, 2023
CITATION: Midland Resources Holdings Limited v. Shtaif, 2023 ONSC 865
COURT FILE NO.: 311/22
DATE: 20230203
ONTARIO
SUPERIOR COURT OF JUSTICE
Divisional Court
MIDLAND RESOURCES HOLDINGS LIMITED
– and –
MICHAEL SHTAIF
REVISED SECURITY FOR COSTS DECISION
Schabas J.
Released: February 03, 2023