SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: C-306-12
DATE: February 1, 2013
RE:
MAS Bottling Inc
and
Royal Bank of Canada
BEFORE: The Honourable Mr. Justice R. Nightingale
COUNSEL:
John McDonald, for the Plaintiff
Robert C. Dunford, for the Defendant
HEARD: January 16, 2013
ENDORSEMENT
[1] The Defendant Royal Bank of Canada brings this motion for an order for security of costs against the Plaintiff which commenced its action in April 2012 for damages in excess of $1.8 million. The Defendant had in another action obtained judgment against the Plaintiff wherein the Plaintiff was ordered to pay the Defendant the sum of $35,491.50 plus costs and this judgment remains fully unpaid.
[2] In this action for which the Defendant is seeking security for costs, the Plaintiff claims its significant damages were caused because of the Defendant’s negligence or breach of contract in the “provision of professional security services”. The Plaintiff’s pleadings are not very detailed regarding its alleged cause of action against the Defendant. The allegation in the Statement of Claim is that on May 20, 2011, the Defendant served an Application for Bankruptcy Order against the Plaintiff and took possession of its premises which contained high speed packaging equipment that had been appraised at a value approximately $370,000.
[3] The Plaintiff further alleges that approximately three weeks later on June 16, 2011 its premises were broken into “while the premises were under the duty of care of the Royal Bank and under the insurance protection of the Royal Bank” and its equipment and premises were destroyed and rendered useless.
[4] The Defendant Royal Bank of Canada, it is alleged, the following week returned the Plaintiff’s premises to it and withdrew its Bankruptcy Application.
[5] Essentially, the Plaintiff’s damages are for the value of the equipment approximately $370,000, the installation value presumably of new equipment of $751,750 and the “loss of the value of the leasehold premises and fixtures to repair break-in damages of the sum of $250,000.”
[6] Both the Statement of Claim and the Statement of Defence confirm that in September 2010 the Plaintiff and its Vice President were being pursued by the Canada Revenue Agency for GST/HST arrears of approximately $35,000 and income source deductions of approximately $108,000.
[7] The affidavit of the Defendant’s representative in this motion confirmed his belief that the Plaintiff had no or insufficient assets in Ontario to pay the costs of the Defendant of this litigation which he suggested would be substantial, “possibly as high as $75,000” for a five to seven day trial.
[8] The affidavit of the Plaintiff’s representative Michael Ostner confirmed that the Plaintiff had no significant assets and accordingly the Defendant has made out a prima facie case for security for costs under Rule 56.01(d).
[9] Accordingly, the onus is on the Plaintiff to prove that it is impecunious and that the merits of the case demand that the action be permitted to proceed without security for costs: Smith Bus Lines Ltd. v Bank of Montreal (1987) 1987 4190 (ON SC), 61 O.R. (2d) 688 at 704. Essentially the onus on the Plaintiff in these circumstances is to lead evidence that it would be unjust if it were prevented from proceeding with the meritorious claim. Warren Industrial Feldspar Co. v Union Carhide Canada Ltd. (1986) 1986 2683 (ON SC), 54 O.R. (2d) 213; Marcon Custom Metals Inc v Arlat Metals Inc. (2003) O.J. 5028.
[10] Essentially as noted in the Smith Bus Lines Ltd case, supra,
“The corporate plaintiff wishing to be allowed to proceed with its action, without either showing sufficient assets or putting up security, must first show “impecuniosity” meaning not only that it does not have sufficient assets itself but also that it cannot raise the security for costs from its shareholders and associates,… To go the impecuniosity route, the plaintiff must establish by evidence that it cannot raise security for costs because, if a private company, its shareholders have not sufficient assets.”
[11] The onus on the Plaintiff requires it to establish that both it and its shareholders cannot sell assets, borrow or otherwise raise the funds to post security. 713484 Ontario Ltd. v McMillan Binch 2003 Carswell Ont 419 (SCJ).
[12] Lastly, to raise impecuniosity, there must be evidence that if security is required, the Plaintiff’s suit will be stopped because the amount of security is not only not possessed by the Plaintiff but is not available to it. Aviaco International Leasing Inc. v Boeing Canada Inc (2000) O.J. 3284 para 13.
[13] The Plaintiff’s affidavit, other than referring to the above mentioned facts that lead to the litigation, only stated the following:
MAS Bottling and its Shareholders Impecunious?
MAS Bottling has no significant assets.
Ostner discloses his assets and major debts as follows:
a. presently employed in construction renovations;
b. no major assets to be realized such as home ownership;
c. owes Canada Revenue Agency $24,000.00;
d. personal bank account is frozen by Canada Revenue Agency;
e. owes Scotia Line Visa approximately $11,000.00 and account is in default; and
f. owes CIBC Aero Gold Visa approximately $10,000.00 and account is in default.
- Macnaughton disclosed his assets and major debts as follows:
a. presently employed in pottery business;
b. owes Canadian Tire approximately $8,330.31 and account is in default;
c. owes CIBC approximately $12,875.33 and account is in default;
d. also owes CIBC approximately $17,374.79 and account is in default; and
e. owes Rogers Communication Partnership $426.80.
[14] What is clear from the Plaintiff’s affidavit is that the Plaintiff provided no evidence or even a statement as to who its shareholders were (although earlier on it was suggested that Michael Ostner was the President and James Macnaughton was the Vice President and Secretary respectively of the Plaintiff). The Plaintiff’s affidavit did not even state that its shareholders and management cannot satisfy an Order for security for costs or otherwise raise the money required to do so. No information was provided particularly in respect to the actual income of Ostner and Macnaughton, whether Mr. Macnaughton had an interest in a house, details of their bank accounts or investments or their ability or inability to borrow funds for or advance them to the Plaintiff company for security for costs.
[15] Moreover, there was nothing in that affidavit to suggest that if an Order for security for costs was made against the Plaintiff, its law suit would be stopped in its tracks and could not proceed.
[16] The Plaintiff resisted the Defendant’s motion for security for costs and in argument and suggested that an Order for security for costs would be “unjust” in this case. It essentially asked this Court to consider the merits of the Plaintiff’s case to determine whether it has a valid cause of action which it should be permitted to litigate without posting security and assess its prospects for success at trial which appears to be contemplated by Trainor J in the Warren Industrial Feldspar Co. case, supra.
[17] However, in addition to the Plaintiff providing no significant evidence establishing its grounds of resisting the motion for security for costs based on impecuniosity, the same is true with respect to its failure to establish and provide any significant evidence of the relative chances of success and the merits of the action. The affidavit material simply made reference to the above mentioned statements from the Statement of Claim regarding the events of May 20, 2011 and June 16, 2011 with no particulars or evidence to even suggest that it was because of any breach of duty of care by Defendant that Plaintiff’s premises were broken into and the equipment and premises destroyed.
[18] Given the lack of evidence in the Plaintiff’s affidavit material filed and the onus required of the Plaintiff with respect to proving impecuniosity, the Plaintiff in my view has not met the requisite test. Based on that finding, it is not necessary for me to assess the merits of the Plaintiff’s case, Treasure Traders International Company, supra; 737071 Ontario Inc. v Min-A-Mart Ltd. 1996 Carswell Ont 1252, other than to state that the Plaintiff may be able to produce the appropriate evidence on which it relies to establish that claim on the examinations for discovery. There may be some merit to the Plaintiff’s claim but there is little evidence in support of it now.
Quantum of Costs
[19] The Defendant suggested in their material as indicated above that its costs of defending the action for a five to seven day trial could approach $75,000 and asked in its factum for $50,000 for security for costs and in argument reduced that to a figure of $40,000. The Defendant suggested it could be paid in two installments with one installment payable immediately for $20,000 and the other within 30 days after the completion of the examination for discovery.
[20] Unfortunately, no Bill of Costs or an estimate of the hours involved of Counsel or the disbursements to be incurred were provided to the Court. The Defendant’s Counsel acknowledged this was not a particularly complicated case involving voluminous documents and that realistically two days of examinations for discovery total for both parties would be required.
[21] Based on the above mentioned findings, I am prepared to make an Order that the Plaintiff post security for costs in the amount of $10,000.00 which would provide a reasonable amount towards the Defendant’s costs between now and the completion of the examinations for discovery. Those costs shall be paid by the Plaintiff within 30 days of the date of this Order failing which this action is stayed. After completion of the examinations for discovery, the Defendant, if it wishes, can renew its motion security for costs being incurred between that date up to and including the trial at which time it can provide the Court with supporting documents regarding the quantum of costs and any other additional evidence in support of that motion.
[22] Normally speaking, the Defendant would be entitled to its costs of this motion payable by the Plaintiff but if the parties are unable to agree on that issue including the amount of the costs payable, they will have 10 days from the date of this Order to provide written submissions not exceeding three pages in length including the Bill of Costs.
The Honourable Mr. Justice R. Nightingale
DATE: February 1, 2013
COURT FILE NO.: C-306-12
DATE: February 1, 2013
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MAS Bottling Inc.
and
Royal Bank of Canada
BEFORE: The Honourable Mr. Justice R. Nightingale
COUNSEL: John McDonald , for the Plaintiff
Robert C. Dunford, for the Defendant
ENDORSEMENT
The Honourable Mr. Justice R. Nightingale
DATE: February 1, 2013