SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-09-390497
MOTION HEARD: DECEMBER 3, 2013

RE: 1309395 Ontario Ltd. v. Pronesti Investments Inc., Vincenzo Pronesti, Francesca Pronesti and Dominic Pronesti

BEFORE: MASTER R.A. MUIR

COUNSEL: Sidney Klotz for the plaintiff
Eric Turkienicz for the defendants

REASONS FOR DECISION

[1] The defendants bring this motion for an order requiring the plaintiff to post security for costs pursuant to Rule 56.01(1)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”). The defendants take the position that the plaintiff is a corporation with insufficient assets in Ontario to pay any costs award that may ultimately be made in favour of the defendants.

[2] The plaintiff is opposed to the relief sought by the defendants.

[3] Rule 56.01(1)(d) provides as follows:

56.01 (1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that, . . .

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.

[4] The test on a motion of this nature is set out in the decision of Master Pope in 1164966 Ontario Inc. v. Coulter, 2011 ONSC 5817 (S.C.J. – Master). The moving defendants have the initial onus of demonstrating that the plaintiff falls into one of the categories set out in Rule 56.01(1). This onus is not a heavy one. The defendants need only show that the plaintiff is a corporation and that there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the costs of the defendants. See 1164966 Ontario at paragraph 24.

[5] The plaintiff is obviously a corporation. I am also satisfied that there is good reason to believe that it has insufficient assets in Ontario to respond to any costs order that may be made in favour of the defendants in this action. The defendants have provided evidence showing outstanding judgments against the plaintiff totalling more than $1,000,000.00. The plaintiff has filed no evidence in response to this motion. The written argument filed by the plaintiff this morning does not address the outstanding judgments in any fashion. Outstanding judgments are an example of evidence amounting to a good reason to believe that a plaintiff has insufficient assets to respond to a costs order. See 1164966 Ontario at paragraph 28.

[6] Given this conclusion, the onus then shifts to the plaintiff to tender evidence that it does have assets available to respond to any costs order or to demonstrate impecuniosity and ask the court to make such order as is just in the circumstances. See 1164966 Ontario at paragraph 25.

[7] In my view, the plaintiff has done none of these things. First, the plaintiff has not filed any evidence showing that is has sufficient assets to respond to a costs order. The bald statement by the plaintiff in its responding argument that it is solvent is not sufficient.

[8] Second, I am unable to find that the plaintiff is impecunious as Mr. Klotz argued. Impecuniosity means something more than simply demonstrating that the plaintiff corporation is without assets. A plaintiff who intends to rely on impecuniosity must also provide evidence that the shareholders of the plaintiff corporation have insufficient assets or are unable to otherwise raise funds to post security for costs. Such evidence must be set out with robust particularity. See 1164966 Ontario at paragraph 26. There is no such evidence before the court. The responding argument of the plaintiff filed today does not address this issue. The plaintiff has not established impecuniosity.

[9] In view of this finding, the plaintiff has a high evidentiary burden to establish that its claim has a good chance of success. See 1164966 Ontario at paragraph 27. In my view, the plaintiff has not met this burden. The reference hearing was limited to an accounting of the amounts owing by the plaintiff under the various mortgages and to the question of whether the mortgages were in default at the time of the defendants’ enforcement proceedings. The reference hearing did not deal with the plaintiff’s broader claims for damages arising from the defendants’ enforcement efforts. In any event, no evidence has been filed on this motion to address these issues. The plaintiff has therefore failed to meet the onus of demonstrating that its claim has a good chance of success.

[10] Finally, I do not view this motion as premature as suggested by the plaintiff in its argument. I see no reason to wait for my decision on the accounting issues. The defendants are not seeking costs related to the reference hearing but simply seek security for costs going forward.

[11] For these reasons, I have concluded that it is just that a security for costs order be made. However, I view the amounts sought by the defendants as excessive. Various affidavits and examinations have already taken place in connection with the reference hearing. A large volume of documents have also been exchanged. The reference hearing involved four days of oral evidence. All of these factors should result in a reduction of the time required for additional discovery going forward. In addition, a portion of the costs sought will inevitably relate to time spent by the defendants in pursuing their counterclaim. For these reasons, the amount requested by the defendants as security should be reduced. Having reviewed the defendants’ draft bill of costs, it is my view that $15,000.00 is a fair and reasonable amount for security for costs through to the end of oral discovery.

[12] The defendants have been successful on this motion and are entitled to costs. The defendants asked for $1,000.00 on a substantial indemnity basis due to the plaintiff’s failure to serve responding material in accordance with my earlier timetable order. I do not view the plaintiff’s conduct as reprehensible so as to justify substantial indemnity costs. The plaintiff did not seek to file any evidence after the deadline in my timetable order. It simply asked to file a written argument. In my view, it is fair and reasonable that the plaintiff pay the defendants’ partial indemnity costs of this motion in the amount of $750.00.

[13] I therefore order as follows:

(a) the plaintiff shall post security for the defendants’ costs in the amount of $15,000.00 within 120 days of the date of this order;

(b) this amount shall be payable in cash or by way of an irrevocable stand-by letter of credit from a Canadian chartered bank, in a form approved by the defendants or the court; and,

(c) the plaintiff shall pay the defendants’ costs of this motion fixed in the amount of $750.00, inclusive of HST and disbursements, payable within 30 days.

Master R.A. Muir

DATE: December 3, 2013