SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-442196
DATE: 2013/06/26

RE: SHIBISH v SCHER et al.

BEFORE: MASTER RONNA M. BROTT

COUNSEL:
John Cannings, for the Defendants/Moving Parties

James Manson, for the Plaintiff/Responding Parties

ENDORSEMENT

[1] The defendants seek an Order that the plaintiff be required to post security for costs.

FACTS

[2] In 2004 the plaintiff, Lori-Ann Shibish (“Shibish”) retained the legal services of the defendant Hugh Scher (“Scher”) to represent her in a lawsuit she had commenced in 1998 against her former employer, Honda of Canada Inc. (“Honda”), and her former employee group insurance benefits carrier, Prudential Insurance Company of America (the “Honda action”). In the Honda action Shibish alleged, inter alia, that Honda had wrongfully dismissed her from her employment, and that Honda and Prudential had wrongfully denied her short and long-term disability benefits. On March 18, 2011 Justice Roberts dismissed the Honda action for delay.

[3] The within action, commenced in 2011, is a solicitor’s negligence action brought against Scher and his law firm wherein Shibish alleges that Scher’s conduct and actions brought about the dismissal of the Honda action. Shibish is seeking to hold the defendants liable for the value of her original claim against Honda as well as various other heads of damages.

[4] On March 30, 2012 Scher and his former law firm commenced an action in Barrie (“Fraudulent Conveyance action”) in which the plaintiffs allege that Shibish fraudulently conveyed her interest in a farmhouse in Bradford Ontario to the co-defendant in that action, Ronald Elmer Conrad (“Conrad”), in order to defeat Shibish’s creditors, including Scher and his law firm. Shibish filed a Statement of Defence and Counterclaim wherein she includes allegations against Scher of negligence, breach of contract and/or breach of fiduciary duty.

LAW

[5] Rule 56.01 of the Rules of Civil Procedure provides that the Court may make such order for security for costs as is just where, among other grounds, it appears that:

(a) The plaintiff is ordinary resident outside Ontario; or

(b) The plaintiff has another proceeding for the same relief pending in Ontario.

[6] Rule 56.01 requires a two-step analysis. First the defendants have the onus of satisfying the court that it appears that the matter comes within one of the six categories enumerated in Rule 56.01. At the second stage, the onus shifts to the plaintiff to establish that an order for security would be unjust. The second stage requires an inquiry into all factors which may assist in determining the justice of the case.

Rule 56.01(1)(a) – The plaintiff is ordinarily resident outside of Ontario

[7] Caselaw is clear that the defendants must satisfy the onus to establish that the plaintiff is “ordinarily resident” outside of Ontario on the basis of proven facts rather than ‘mere conjecture, hunch or speculation” (MacKinnon v A.J. Bus Lines, 2010 ONSC 2802, 2010 CarswellOnt 3213). The Court must be satisfied on the balance of probabilities that the plaintiff is ordinarily resident outside of Ontario.

[8] Shibish currently resides in Perth, Australia. The affidavit evidence upon which she was never cross-examined, states inter alia that she considers herself to be ordinarily resident in Ontario. She was born and raised in Ontario and some family members still live in Ontario. She states that her permanent residence is the farmhouse in Bradford, which is the subject matter of the Fraudulent Conveyances action. She pays no rent to stay there when she is in Ontario. She is currently covered by OHIP and has seen Ontario doctors over the last few years. She intends to return to Ontario upon completion of her studies in Australia in December 2013. The plaintiff holds a class 155 Visa which, according to the Australian government, “is a permanent visa for current or former Australian permanent residents and former Australian citizens. This visa permits one to maintain or regain one’s status as an Australian permanent resident.”

[9] Ms. Shibish resided in Australia from January 2003 to September 2006 while the Honda action was on-going. There is a plethora of evidence outlining the plaintiff’s directions to Mr. Scher and his predecessor on the file, Mr. Wright, that they were not to disclose the fact that she did not reside in Ontario to defence counsel in the Honda action as she wanted to “avoid liability for the payment of security for costs.” She was in Ontario for a period of time in 2006 and 2007 but again the evidence is that she intended to “go home to Australia”. In September 2007 the plaintiff enrolled at Vancouver Island University in Nanaimo, British Columbia where she remained until June 2011. During the summer of 2011 Ms. Shibish stayed at the farm house now owned by Conrad. She paid no rent. In December 2011 she returned to Australia to study.

[10] In Austin v Torstar Corp. 2001 CarswellOnt 2814 Master MacLeod wrote that “actions speak louder than words.” In this action, Ms. Shibish is the recipient of an academic scholarship available only to citizens and permanent residents of Australia. She is studying there and working part-time. Ms. Shibish has no exigible assets in Ontario, having divested herself of her interest in the Bradford farm, it being her only known asset in Ontario.

[11] I am satisfied that the defendant has satisfied his onus to demonstrate on a balance of probabilities that Ms. Shibish is ordinarily resident outside of Ontario. In the past twelve years Ms. Shibish has been absent from Ontario for more than ten of them. As Master MacLeod stated in Torstar, supra, “In a case where the evidence is ambiguous, for the purpose of this rule, one of the critical factors may well be whether or not the plaintiff retains assets in the jurisdiction which would be exigible to satisfy a judgment for costs. Here, although the plaintiff maintains she is ordinarily resident in Ontario, there is certainly suspicion that the plaintiff disposed of her interest in the farm to avoid having to satisfy potential costs against her. Further the evidence of her intended return to Ontario is vague. There is no compelling evidence to suggest where she will reside or whether she intends to work or study upon her return to Ontario.

[12] Because I find that the plaintiff is ordinarily resident outside of Ontario pursuant to Rule 56.01(1)(a), it is not necessary to review the evidence with respect to Rule 56.01(1)(b). I note nonetheless that a review of the pleadings in both the solicitors’ negligence action and the Fraudulent Conveyance actions unquestionably reveals a significant amount of overlap of the acts complained of by Ms. Shibish against Mr. Scher.

Impecuniosity

[13] The plaintiff has the onus to substantiate her allegation of impecuniosity which caselaw states is more than mere financial hardship. The defendants, relying on Morton v Canada (Attorney General) 2005CarswellOnt 939 submit that on a motion for security for costs, the plaintiff’s financial evidence must be set out with “robust particularity” – leaving “no unanswered material questions”. The defendants assert therefore that financial disclosure should include:

1. The amount and source of all income;

2. A description of all assets, including values;

3. A list of all liabilities and significant expenses;

4. An indication of the plaintiff’s ability to borrow funds;

5. Details of any assets disposed of or encumbered since the cause of action arose.

[14] Ms. Shibish has failed to produce a statement of net worth. She has conflicting evidence with respect to her rent in that she claims a monthly expense of $1100(AUD) for rent yet her unsworn Supplementary Affidavit states that she paid no rent between December 2011 and August 2012. She fails to provide any evidence of her ability to borrow. She has applied for and holds a number of credit cards but has disclosed none of those applications. She is the recipient of a scholarship with a monthly income of $2083 and she works part-time at a winery in Australia. There is also the issue of the ownership of the farm which the plaintiff denies but the defendant asserts is a continuing interest.

[15] The plaintiff has not made ample disclosure and accordingly has failed to establish impecuniosity. This is so whether I adopt the plaintiff’s reliance on Zeitoun wherein the plaintiff alleges that she need only demonstrate impecuniosity on a balance of probabilities.

Devoid of Merit / Good Chance of Success

[16] Where impecuniosity is not shown, a closer scrutiny of the merits is required than if impecuniosity has been demonstrated. Here therefore the plaintiff must show a “good chance of success” (as opposed to her claim simply being devoid of merit). To make that determination the court must review the pleadings, evidence, transcripts and other relevant facts before it.

[17] The plaintiff relies on what she describes as Scher’s admissions of delay in the Honda action as evidence of her good chance of success in the within solicitor’s negligence action. As well, Ms. Shibish asserts that Scher was in a conflict of interest by continuing to represent Ms. Shibish in arguing the delay motion before Justice Roberts. On cross-examination Scher admitted that it never occurred to him that he might be in a conflict. She submits that because she relied on Scher’s advice during the course of the Honda action that he believed that her claim had merit, she maintains that she will have a good chance of success in this action.

[18] The defendant relies inter alia on the following evidence to demonstrate that the within action is devoid of merit:

(a) By the time these defendants assumed carriage of the Honda action in January 2004, the matter was already plagued by delay;

(b) At all material times the plaintiff was aware of the delay and the deleterious effects of those delays on the underlying action;

(c) The plaintiff prejudiced her ability to recover anything in the solicitor’s negligence action by failing to follow the defendants’ recommendations, by failing to provide instructions, remaining out of the jurisdiction, refusing to return to Ontario for examinations for discovery, refusing to provide necessary documents, misrepresenting facts, rejecting Honda and London Life’s offers to settle and abandoning her appeal of Justice Roberts decision.

(d) The claim is statute-barred.

[19] In her reasons dismissing the action for delay, Justice Roberts specifically rejected the plaintiff’s submission that the defendants were not proceeding in good faith. Further she stated; “The evidence demonstrates that Ms. Shibish controlled the manner in which her claims were addressed and adjudicated to the point of not always following the advice of very able counsel who have represented her from the inception of this action. The evidence also shows that Ms. Shibish was well aware of the deleterious effect of delay on the viability of her civil action. She cannot now complain that it is unfair that she is held accountable for her choice of proceeding in a certain way.”

[20] Heeding the Reasons of Justice Roberts and having reviewed the plaintiff’s evidence on this motion, I am not satisfied that the plaintiff has provided ample evidence of a good chance of success in the within action. Taking into account what is just and fair, I find that it would be unfair to allow the plaintiff to compel the defendants to defend both the within action and the counterclaim in the Fraudulent Conveyances action without requiring the plaintiff to post security for costs. Justice requires fairness to both the plaintiff and the defendants.

[21] The defendants seek an order requiring the plaintiff to post security for costs of the defendants in the amount of $404,430.00.

[22] The plaintiff submits that the amount claimed by the defendants “borders on the absurd”. Relying on recent caselaw, the plaintiff asserts that the calculation for examinations for discovery should be based on the prima facie duration established by the new rule which in this case would limit the examination to 14 hours plus preparation. Further, given the plaintiff’s limited means, the plaintiff requests a pay-as-you-go basis with 6 – 12 months to post the security.

[23] The defendants have not provided detailed evidence with respect to their costs nor have they justified the lengthy amounts of time estimated for each step of the litigation.

[24] IT IS ORDERED that the plaintiff shall post security for costs to the credit of this action with the accountant of the Superior Court of Ontario in favour of the defendants, on a partial indemnity basis up to the end of examinations for discovery in the amount of $40,000.00 inclusive of GST and disbursements to be paid within 60 days. Following discoveries the defendants shall be at liberty to move for further security.

[25] If the parties are unable to agree within thirty (30) days on the issue of costs of the security for costs motion and the refusals motions which was heard on February 25, 2013, then brief written submissions of 1 – 2 pages together with costs outlines shall be served and filed within sixty (60) days. No reply submissions may be filed without leave.

MASTER RONNA M. BROTT

DATE HEARD: May 2, 2013