ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV09-72
DATE: 2012-01-31

B E T W E E N:

1286342 Ontario Inc. O/A Yachtware Marine Services

Paul Amey, for Plaintiffs

Plaintiff

• and –

Christine Dennis, Randy Fries, Eleanor Fries, ReMax Erie Shores Realty Inc. and Matt Johnston

Aaron Postelnik, for the Defendants ReMax Erie Shores Realty Inc. and Matt Johnson
D. Ryerse , for the Defendants Christine Dennis, Randy Fries and Eleanor Fries

Defendants

HEARD: January 12, 2012

The Honourable Mr. Justice D. J. Gordon

ENDORSEMENT

[ 1 ] Security for costs has been addressed in several prior orders granted by Matheson, J. At the present time, the plaintiff has failed to post security of $40,000.00, as directed. Cost awards of $17,500.00 remain unpaid. In result, the defendants seek a dismissal of the action.

[ 2 ] The plaintiff requests an adjournment of the defendants’ motion as well as leave to extend, rescind or reduce the amount required for security and leave to extend the time for payment of the cost awards.

Background

[ 3 ] This action pertains to the closing of a real estate transaction in November, 2008. 1286342 Ontario Inc. purchased certain property from Christine Dennis, Randy Fries and Eleanor Fries. Matt Johnson was the listing realtor and represented the vendors, being employed or affiliated with ReMax Erie Shores Realty Inc.

[ 4 ] The plaintiff seeks damages for alleged defects, misrepresentations, breach of warranty and other matters. The defendants deny liability.

[ 5 ] The statement of claim was issued in May 2009. The statements of defence followed in June and July 2009. The action remains at the pleadings stage, despite the passage of time.

[ 6 ] Randy Desnoyers, the principal of 1286342 Ontario Inc., was initially a co-plaintiff. The plaintiffs were not then represented by counsel. Mr. Amey was consulted in late December 2010 and retained by the plaintiff shortly thereafter.

[ 7 ] The following is a summary of prior motions and rulings:

i) May 3, 2010

The plaintiffs’ motion sought an order adding a number of defendants and permitting Mr. Desnoyers to represent the corporate plaintiff. The defendants sought a dismissal of the claim of the personal plaintiff and security for costs. Not all of the proposed addition defendants were served.

In his endorsement, released May 17, 2010, Matheson, J. adjourned the motion to July 29, 2010 and awarded costs of $2,000.00, payable by the plaintiff, by July 2, 2010, being $500.00 to each of the appearing parties.

ii) July 29, 2010

In his endorsement, released October 8, 2010, Matheson, J. granted an order as follows:

(a) Mr. Desnoyers permitted to represent the corporate plaintiff, 1286342 Ontario Inc.;

(b) Plaintiff granted leave to add several party defendants;

(c) The action by Mr. Desnoyers was dismissed; and

(d) Security for costs to be posted by the plaintiff within 45 days, in the amount of $50,000.00, being $10,000.00 for each defendant group.

The claims against the added party defendants never proceeded and, it appears, were subsequently settled.

iii) August 16, 2011

As previously mentioned, Mr. Amey was retained by the plaintiff in late 2010. Mr. Desnoyers sold certain assets and, in February 2011, delivered approximately $20,000.00 to Mr. Amey. The funds remain in Mr. Amey’s trust account.

The plaintiff, in this motion, sought an order granting leave to extend the time for posting of security for costs with respect to the remaining defendants and to amend the Statement of Claim. As there were two groups of defendants, not five as on the prior motion, the plaintiff requested the amount of security be reduced to $20,000.00.

In his endorsement, released September 20, 2011, Matheson, J. granted the following order:

(a) Security for costs was reduced to $40,000.00 to be deposited in court within 30 days;

(b) Leave to amend the statement of claim granted; and

(c) Costs awarded to the defendants of $16,000.00, being $8,000.00 for each defendant group.

iv) November 24, 2011

The plaintiff sought a clarification of the prior ruling. In his endorsement, released December 1, 2011, Matheson, J. made reference to a typographical error on an item that did not affect his decision. He dismissed the motion, awarded costs of $750.00 to each defendant group and required the plaintiff to obtain leave for any new step in this action.

Current status

[ 8 ] At some point, the plaintiff made a partial payment towards the cost awards. In result, it appears the following are outstanding:

(a) Security for costs of $40,000.00; and

(b) Cost awards of $17,500.00.

Defendants’ Motions

[ 9 ] Both defendant groups seek an order dismissing the action, relying on Rule 56.06, 57.03 and 60.12, Rules of Civil Procedure. Their request is founded on the plaintiff’s failure to comply with interlocutory orders requiring the posting of security for costs and payment of cost awards.

Plaintiff’s Motion

[ 10 ] The plaintiff seeks the following relief:

(a) Adjourning the defendants’ motion above;

(b) Leave to extend the time for posting of security for costs;

(c) Leave to rescind or reduce the amount of security for costs; and

(d) An order extending the time for payment of the outstanding cost awards.

[ 11 ] Although the motion did not formally request leave to present the motion, as directed in the prior endorsement of Matheson, J. on December 1, 2011, all counsel were aware of the requirement. I am not persuaded by the defendants’ objection in this regard.

[ 12 ] In his affidavit, sworn January 6, 2012, Mr. Desnoyers makes reference to his attempts to raise the required funds. As previously mentioned, $20,000.00 is in Mr. Amey’s trust account. The business is not active and has no assets of any consequence. Family members are unable to provide financial assistance. Mr. Desnoyers refers to the following items:

(a) An outstanding claim regarding his prior employment, filed with the Ontario Labour Relations Board:

(b) Anticipated Employment Insurance Benefits of $1,400.00 monthly to commence January 17, 2012; and

(c) A judgment against D. Keller for $50,000.00, obtained in 2003, with a pending judgment debtor examination and an understanding the judgment debtor received an inheritance of $90,000.00 in May, 2011, but resides at property registered solely in the name of her spouse.

[ 13 ] Mr. Desnoyers goes on to say, at para. 30, he is “cautiously optimistic” of receiving funds from one or both sources mentioned in the next few months to pay some or all of the amounts directed by the court.

Law

[ 14 ] The following are the relevant provisions in the Rules of Civil Procedure:

(a) 56.06 – Default of Plaintiff or Applicant – Where a plaintiff or applicant defaults in giving the security required by an order, the court on motion may dismiss the proceeding against the defendant or respondent who obtained the order, and the stay imposed by rule 56.05 no longer applies unless another defendant or respondent has obtained an order for security for costs.

(b) 56.07 – Amount May be Varied – The amount of security required by an order for security for costs may be increased or decreased at any time.

(c) 57 . 03(2) - Costs of a Motion –Where a party fails to pay the costs of a motion as required under subrule (1), the court may dismiss or stay the party’s proceeding, strike out the party’s defence or make such other order as is just.

(d) 60 . 12- Failure to Comply with Interlocutory Order – Where a party fails to comply with an interlocutory order, the court may in addition to any other sanction provided by these rules (a) stay the party’s proceeding; (b) dismiss the party’s proceeding or strike out the party’s defence; or (c) make such other order as is just.

[ 15 ] The aforementioned rules provide for discretionary relief. Cases ought to be decided on the merits. However, court orders must be complied with if our system is to have any legitimacy. See, for example, Leonard v. Prior, 1994, Carswell Ont 578 (O.C.J. – Gen. Div.) at para. 12; and RNH Real Estate Developments Inc. v. Lodi, 2006 Carswell Ont 2113 (Ontario Master) , at para. 19 .

[ 16 ] These sometimes competing factors must be considered in the exercise of the courts discretion.

[ 17 ] When confronted with a motion to dismiss the action, the plaintiff/responding party must provide “persuasive evidence” justifying an extension of the prior orders. See Leonard, supra, at para. 22.

[ 18 ] Counsel were unable to locate any decisions involving a request to decrease the amount of security for costs. Such a remedy is recognised in Rule 57.07. Often circumstances change during the lawsuit and, as such, orders may be revisited. See, for example, Websports Technologies v. Cryptologic Inc., 2005 Carswell Ont 1327 (Ontario Masters) , at para. 7 . The more common practice is to seek an increase in the amount of security as legal and other expense rarely is less than initially advertised.

Analysis

[ 19 ] To his credit, Mr. Desnoyers has raised $20,000.00 of the $57,500.00 required for security for costs and cost awards. That was done some time ago and the time limits imposed have expired.

[ 20 ] Mr. Desnoyers is “cautiously optimistic” in obtaining the balance of funds required, reporting on two recent events arising since the last court appearance. Although it is difficult to accept the optimism as being realistic, there is some evidence upon which a short, but final, extension is warranted. The request for three months is reasonable in the circumstances. Such is not prejudicial to the defendants.

[ 21 ] Although it would be premature to assess or comment on the merits of the plaintiff’s claim, experienced counsel, as here, would not accept a retainer without a review of the client’s case. It is of fundamental importance that a litigant be allowed, within reasonable limits, to have a case decided on its merits. Nevertheless, Mr. Desnoyers has tested the limits of the court’s patience. This will be the last extension.

[ 22 ] I am not prepared to vary the amount required for security for costs. Matheson, J. provided an extensive review of the law and the circumstances in this case in his prior decisions. The required amount was reduced, taking into account that only two of the prior five defendant groups remained in this action. The amount imposed remains reasonable.

[ 23 ] Failure to post security for costs and to pay the existing cost awards, in all likelihood, will result in a dismissal of the action.

Summary

[ 24 ] In result, an order is granted, extending the time period imposed in the order of Matheson, J., granted September 20, 2011, by allowing the plaintiff until April 30, 2012, to post the amount specified as security for costs and to pay the existing cost awards.

[ 25 ] The defendants’ motions, therefore, are adjourned without date, returnable on seven days notice, but not before the aforementioned date.

[ 26 ] If the parties are unable to agree on the issue of costs, written submissions will be required. Costs will not be considered before the expiration of the extended time period and may well be impacted by the plaintiff’s ability to comply with the court order. Further direction with be provided on this issue upon request of counsel.

Gordon, J

Released: January 31, 2012