Court File and Parties

COURT FILE NO.: C-32-10
DATE: 2012-04-24
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Kevin Fitzgerald, Plaintiff/Defendant

AND:
Southmedic Incorporated, Defendant/Plaintiff

BEFORE: The Honourable Mr. Justice D. A. Broad

COUNSEL:
Steven D. Gadbois, for the Plaintiff/Defendant
Jonathan C. Lisus, for the Defendant/Plaintiff

HEARD: April 23, 2012

ENDORSEMENT

[ 1 ] This action is brought by the plaintiff for damages for his alleged wrongful termination as a sales representative for the defendant and for alleged unpaid commission. The damages sought by the plaintiff exceed $7,000,000.00, of which the sum of $2,066,064.00 is comprised of a sales commission that the plaintiff alleges is due and owing to him in respect a large order placed with the defendant in October, 2009. Although the plaintiff played no part in the order, he states that, as it emanated from his exclusive sales territory, he is entitled to commission for the sale under the terms of his contract with the defendant.

[ 2 ] This is a motion brought by the defendant pursuant to Rule 56.01(1) for an Order requiring the plaintiff to post security for costs on the basis that the plaintiff is ordinarily resident outside of Ontario, specifically Costa Rica, and it is just in the circumstances to do so.

[ 3 ] The plaintiff resists the motion on the basis that there has been delay on the part of the defendant in moving for security for costs and on the basis that he is impecunious and if security for costs were to be ordered he would be unable to proceed with the action, which would result in an injustice. The plaintiff also takes the position that leave is required to bring the motion under Rule 48.04(1) and, in the circumstances, leave should not be granted.

[ 4 ] The following is a summary of the chronology of the action to date:

i. January 12, 2010 – Statement of Claim issued;

ii. February 11, 2011 – Statement of Defence and Counterclaim issued;

iii. July, 2011 – Affidavits of Documents exchanged;

iv. November 2010 – Examinations for discovery conducted;

v. May 19, 2011 – Trial Record served and filed by Plaintiff/Defendant by counterclaim;

vi. September 6, 2011 – Pre-trial conducted and, on consent, action set for trial for February 2012 sittings;

vii. October 24, 2011 – Defendant retained new counsel;

viii. October 27, 2011 – Order made removing Plaintiff/ Defendant by counterclaim‘s former counsel;

ix. November 25, 2011 – Plaintiff’s new counsel appointed;

x. February 13, 2012 – Trial adjourned to June, 2012 sittings.

[ 5 ] It is noted that the Plaintiff stated at paragraph 2 of the Statement of Claim that he was a resident of the City of Kitchener in the Province of Ontario. Similarly, in his Affidavit of Documents of July 12, 2010 the Plaintiff swore that he was “of the City of Kitchener, in the Regional Municipality of Waterloo, in the Province of Ontario.” Moreover, the plaintiff, in his various filed Income Tax returns, up the 2011 tax year, continued to describe himself as being resident in Ontario.

[ 6 ] In early 2012, counsel for the Defendant, on the basis of documentary disclosure, became alert to the possibility that the plaintiff may be resident in Costa Rica rather than Ontario, as previously represented by the plaintiff and made numerous demands pursuant to Rule 56.02 that the plaintiff provide a declaration as to whether he is ordinarily resident in Ontario. The plaintiff did not provide a clear response to the demands under rule 56.02, but his counsel finally provided a letter dated February 16, 2012 giving the plaintiff’s address when plaintiff resides in Costa Rica and his address when he resides in Canada. The letter concludes “as of last year, Mr. Fitzgerald was in Costa Rica more than he was in Canada, but it may vary and he has maintained his Canadian residence for tax purposes.”

[ 7 ] The defendant’s undisputed evidence is that on the attendance of counsel for the parties on the adjournment of the trial, counsel for the plaintiff acknowledged that the plaintiff resided in Costa Rica. It is noteworthy that the plaintiff, in his Affidavit filed in response to the Motion, does not provide clear information as to his ordinary residence, stating only that he spent considerable time in Costa Rica while he “pursued business opportunities” there. He did acknowledge that he spent over half of the year in Costa Rica in each of 2010 and 2011. I find that on the wording of rule 56.01(1) (a) “it appears that the plaintiff is ordinarily resident outside Ontario” (emphasis added). The plaintiff has not displaced this appearance.

[ 8 ] On the question of whether leave is required for the Defendant to bring the Motion for security for costs, the plaintiff argues that, by agreeing at the pre-trial to the matter being set for the February 2012 trial sittings, the defendant “consented to the action being placed on a trial list” pursuant to rule 48.04. I find that, by simply agreeing at the pre-trial to the sittings at which the matter would be tried, the defendant did not “consent to the action being placed on a trial list”, so as to be precluded from bringing interlocutory motions without leave. The action was already on a trial list by virtue of it having been set down for trial. If I am wrong in this, I would exercise my discretion to grant leave to the defendant to bring the motion due to the fact that the information respecting the plaintiff being ordinarily resident outside of Ontario only came to light in early 2012. I agree with counsel for the defendant that, on the authority of the case of Tanner v Clark , (1999) 30 C.P.C. (4th) 358 (Ont. Gen Div) at para. 13 , citing the case of Gloucester Organization Inc. v Canadian Newsletter Managers Inc. (1995), 1995 7144 (ON SC) , 21 O.R. (3d) 753 (Ont. Gen Div), “the principles to be considered in the exercise of the discretion contained in rule 48.04(1) will vary and will depend upon the nature of the leave requested and the circumstances of the case.”

[ 9 ] On the question of whether there was delay on the part of the defendant in bringing the motion, counsel the plaintiff points to answers given on discovery by the plaintiff that he worked for and operated a corporation incorporated in Costa Rica in 2010, and states that the defendant was put on enquiry with respect to the plaintiff’s connection to Costa Rica and failed to diligently pursue that issue. I find that a suggestion that the defendant was aware that plaintiff incorporated a company in Costa Rica is far from determinative of when the defendant knew or should have known that the plaintiff was ordinarily resident in that country, particularly in the face of the plaintiff’s representations in the Statement of Claim and the Affidavit of Documents that he was resident in Kitchener. I find that there was no prejudicial delay on the part of the defendant in bringing the motion.

[ 10 ] Once it is determined that it appears that the plaintiff is ordinarily resident outside Ontario, the issue then becomes whether it is just to order security considering all of the relevant circumstances, including, but not limited to, the plaintiff’s financial situation and the merits of the plaintiff’s case [see Stojanovic v Bulut 2011 ONSC 874 , at para. 69] .

[ 11 ] As stated by the Divisional Court in Zeitoun v Economical Insurance Group (2008) C.P.C. (6th) 308, at para. 46, the onus is on the plaintiff to demonstrate impecuniosity on a balance of probabilities. The evidence of this must be reasonably complete and persuasive. I find that the affidavit of the plaintiff falls short of the standard in this respect. Indeed it appears to pose more questions than it answers. The plaintiff deposes that he is in Costa Rica to “pursue business opportunities” without disclosing what they are, how much money they generate, what their prospects are, and the nature and extent of the plaintiff’s involvement in these “business opportunities.” Similarly there is no information given as to how the plaintiff supports himself in Costa Rica and arranges transportation between Canada and Costa Rica. At its highest, the plaintiff’s affidavit may suggest the existence of some financial hardship, but not impecuniosity.

[ 12 ] Counsel for the defendant notes that the plaintiff refused to attend to be cross-examined on his affidavit, purportedly on the basis that leave to bring the motion had not been obtained. I find that that was not a proper basis upon which to refuse to submit to cross-examination. Counsel for the plaintiff candidly states that the real reason for refusing to attend for cross-examination was to avoid the plaintiff being exposed to cross-examination on the merits of his claim. When impecuniosity is relied upon in defence of a motion for security for costs, the merits of the plaintiff’s claim is a relevant and important consideration. The defendant argues that the plaintiff’s affidavit should be struck out or not considered on the basis of the plaintiff’s refusal to attend to be cross-examined on it. I find that it is not necessary to consider striking the affidavit as it does not adequately address the questions of impecuniosity or financial hardship, nor does it respond to the question of the merits of the claim, in any event.

[ 13 ] I find that the defendant is entitled to security for costs in the circumstances. The defendant seeks security for costs in the amount of $65,000.00, representing a conservative estimate of the partial indemnity costs from this point through to the conclusion of the trial, estimated to last ten days, including both senior and junior counsel.

[ 14 ] Although the use of senior and junior counsel at trial may ultimately prove to be justified on an assessment or fixing of costs after trial if the defendant is successful, for the purposes of setting security for costs I find that, in this case, it would be appropriate to base the amount on one counsel, plus necessary clerks’ assistance. I would therefore fix the amount of the security for costs in the sum of $50,000.00, plus HST in the sum of $6,500.00, for a total of $56,500.00.

Disposition

[ 15 ] On the basis of the foregoing, it is ordered that the plaintiff be required to post security for costs by the payment into court of the sum of $ 56,500.00 within 30 days of the date hereof.

[ 16 ] Counsel may make brief written submissions with respect to costs, the defendant’s within 14 days hereof, and the plaintiff’s within 21 days hereof.

D. A. Broad J.

Date: April 24, 2012