High Park Family Fun Place Inc. v. United Republic Of Properties Ltd.

2013 ONSC 4711

COURT FILE NO.: CV-12-449664
MOTION HEARD: JULY 10, 2013

ONTARIO – SUPERIOR COURT OF JUSTICE

High Park Family Fun Place Inc. v. United Republic Of Properties Ltd.

Murray Teitel for the defendant
Pulat Yunusov for the plaintiff

ENDORSEMENT

Master R.A. Muir -

[1] This is a motion brought by the defendant. The defendant originally sought an order requiring the plaintiff to post security for costs and an order that the plaintiff serve an affidavit of documents.

[2] The motion was originally returnable on November 29, 2012. It was adjourned on consent to allow the plaintiff to file responding evidence. The next return date was March 14, 2013. A few days before that return date, on March 8, 2013, the plaintiff served its responding evidence. This motion was then adjourned again, this time to July 10, 2013, to allow the defendant to consider its position in light of the plaintiff’s evidence.

[3] On July 5, 2013, the defendant advised the plaintiff that it would not be seeking an order for security for costs but would be asking the court to make an order requiring the principals of the plaintiff to provide an undertaking that they be bound by any costs orders that may be made against the plaintiff in this action.

[4] The plaintiff has served its affidavit of documents. No order is now sought in respect of that relief.

[5] The plaintiff and the defendant both seek their costs of this motion.

BACKGROUND

[6] This is a dispute over a lease agreement. The plaintiff was a tenant of the defendant. The plaintiff alleges that the defendant breached the term of the lease agreement and wrongfully evicted the plaintiff. The defendant denies this allegation and has counterclaimed for arrears of rent.

[7] It is clear from the evidence that the plaintiff has insufficient assets to respond to a costs order. It no longer carries on business and earns no revenue. Its most recent balance sheet shows liabilities in excess of assets by approximately $125,000.00. The two principals of the plaintiff are also unable to respond to any costs award. They both made assignments in bankruptcy in July 2012. They have recently been discharged from bankruptcy. One of the principals is unemployed. The other earns about $3,500.00 per month. In short, the plaintiff is impecunious, which probably explains the defendant’s decision to abandon the portion of this motion seeking security for costs.

PERSONAL UNDERTAKING TO PAY COSTS ORDERS

[8] I am not prepared to make an order that the plaintiff’s principals be responsible for any costs awards against the plaintiff.

[9] First, the defendant has not specifically asked for this form of relief in its notice of motion or in an amended notice of motion. In my view, such a request should be explicitly requested as an alternative form of relief so the responding parties know exactly what they are facing. Moreover, no specific notice that this relief would be requested was provided to the affected individuals. They are not parties to this action. While it appears from the responding material that Mr. Yunusov is in contact with the principals of the plaintiff, he is lawyer of record for the plaintiff only.

[10] Second, this is not a situation where wealthy shareholders have deliberately organized their affairs so as to conduct litigation while hiding behind a shell plaintiff. The plaintiff was an operating business at one point. It was certainly not created simply for the purpose of pursuing this litigation. Moreover, the principals of the plaintiff are in the same financial condition as the plaintiff itself.

[11] Finally, it is my view that the cases relied upon by the defendant are distinguishable.[^1] The Albino & Mike and Biotechnik decisions arise in the context of proceedings under the Construction Lien Act, R.S.O. 1990, c. C.30 (the “CLA”). Those decisions appear to be motivated by the desire of the court to “level the playing field”. The plaintiffs in those cases enjoyed a level of security by reason of their liens under the CLA. It appears that the corporate plaintiffs in those actions did not have sufficient assets to respond to any costs orders. For that reason, the courts in those cases determined that justice would be served by also providing the defendants with a measure of security. See Albino & Mike at paragraph 2 and Biotechnik at paragraph 52.

[12] Printing Circles is a decision where the plaintiff itself suggested an order making its principal personally liable for costs as an alternative to posting security for costs in a situation where the court had found that a security for costs order was appropriate. In my view, Printing Circles is also not applicable to the facts before the court on this motion.

[13] For these reasons, I have concluded that it is not just in the circumstances of this action for the court to make an order that the principals of the plaintiff be personally responsible for any costs orders against the plaintiff.

COSTS OF THE MOTION

[14] Both the plaintiff and the defendant seek their costs of this motion. The court’s general authority to award costs as between parties to litigation is found in section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides that costs are in the discretion of the court. Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) sets out a non-exhaustive list of factors the court is to consider when awarding costs. Rule 1.04(1.1) is also applicable. It requires the court in applying the Rules to make orders that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding. In general terms, the overall objective for the court is to fix an amount that is fair and reasonable for the unsuccessful party who generally must pay the costs of the successful party. See Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (C.A.) at paragraph 4 and Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.) at paragraph 26. In Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722 the Court of Appeal stated as follows at paragraph 52:

Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.

[15] In my view, the plaintiff has been the successful party. The defendant abandoned the relief it sought in connection with security for costs. The portion of the motion seeking an order with respect to the plaintiff’s affidavit of documents was premature. No request for an affidavit of documents had been made before the motion was brought. The defendant only served its affidavit of documents at the same time it served notice of this motion. Finally, the principals of the plaintiff have been successful in resisting the defendant’s request for an order that they be personally responsible for costs orders made against the plaintiff.

[16] However, I agree with the defendant that the plaintiff should have been more forthcoming in response to the defendant’s inquiries about its assets and whether security for costs should be provided. I agree that there is no obligation on a plaintiff to reveal the details of its financial circumstances, absent a motion of this nature. However, in my view it would have been prudent for the plaintiff to have done so in these circumstances, which may have avoided the necessity of this motion. In particular, from a practical point of view, the plaintiff should have advised the defendant that both of its principals had made assignments in bankruptcy in July 2012. After all, the making of the assignments in bankruptcy is a matter of public record. For this reason, it is appropriate that a significant reduction be made to the costs being requested by the plaintiff.

[17] I have reviewed the costs outlines of both parties and considered the factors and principles set out above. The plaintiff’s costs outline is in the amount of $4,051.14 on a partial indemnity basis. The defendant’s costs outline identifies partial indemnity costs of $6,105.02.

[18] In my view, both of these amounts are somewhat excessive. This was not a complex motion. The facts and the law are straightforward. I do, however, agree that the motion was important to the plaintiff as it appears that an order for security for costs would have prevented the plaintiff from continuing with its claim. I also note that this is a simplified procedure action.

[19] For all of these reasons, it is my view that it is fair and reasonable that the defendant pay the plaintiff’s costs of this motion fixed in the amount of $1,500.00.

ORDER

[20] I therefore order as follows:

(a) the defendant’s motion is dismissed; and,

(b) the defendant shall pay the plaintiff’s costs of this motion fixed in the amount of $1,500.00 inclusive of HST and disbursements, payable within 30 days.

Master R.A. Muir

DATE: July 10, 2013

[^1]: Those cases are: Albino & Mike Contracting Ltd. v. James, [1992] O.J. No. 3877 (G.D. – Master); Biotechnik Inc. v. O’Shanter Development Co., [2003] O.J. No. 1633 (S.C.J. – Master); Printing Circles Inc. v. Compass Group Canada Ltd., 2007 57095 (ON SC), [2007] O.J. No. 5066 (S.C.J.).