SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-12-445632
DATE: January 9, 2014
RE: Totalsiteworks Construction Corporation (plaintiff) v.
Mady Contract Division Ltd., The Bank of Montreal, St. George and St. Rueiss Coptic Orthodox Church (defendants);
BEFORE: MASTER C. WIEBE;
COUNSEL: Sean Clarke for Mady Contract Division Ltd., the moving party; Baichoo, J. P. for Totalsiteworks Construction Corporation, the responding party;
HEARD: January 3, 2014 at Toronto, Ontario.
REASONS FOR DECISION
1This is a motion by Mady Contract Division Ltd. (“Mady”) for an order granting it leave to bring this motion, requiring that the plaintiff, Totalsiteworks Construction Corporation (“Totalsiteworks”), post security for Mady’s future costs to defend this action in the amount of $50,000, and that Totalsiteworks pay Mady its costs of this motion on a substantial indemnity basis. Mady grounds its motion on Rule 56.01(1)(d), namely the argument that Totalsiteworks is a corporation and that there is “good reason to believe” that it has insufficient assets in Ontario to pay Mady’s costs of defending the Totalsiteworks’ action.
2Totalsiteworks defends this motion claiming that it is impecunious with a meritorious claim that would be thwarted if the requested order is given, thereby requiring that the court deny the motion. It also argues that, even if it is found not to be impecunious, Mady has delayed in bringing this motion without giving an explanation for such delay, thereby requiring this court to deny the motion as a matter of justice. It also argues that Mady has failed to meet the requirement for leave to bring this motion under section 67(3) the Construction Lien Act.
Background:
3This is an action concerning a claim for lien that was registered by Totalsiteworks on December 11, 2011 in the amount of $285,743.10. Totalsiteworks was a subcontractor to Mady for the supply and installation of excavation, grading, underground site services, granular materials and other services concerning a renovation project Mady had undertaken as general contractor on certain church property in Toronto in 2010 and 2011. On January 20, 2012 Mady obtained an order from Master Muir vacating the said claim for lien upon the posting of a lien bond in the amount of $335,743.10, $50,000 of which was security for Totalsiteworks costs.
4Totalsiteworks purported to preserve its lien by commencing an action on February 3, 2012 in relation to the said claim for lien. On or about March 2, 2012, Mady delivered a Statement of Defence and Counterclaim claiming that Totalsiteworks had been adequately paid for the work it performed, that Totalsiteworks did not complete its work, that Totalsiteworks performed its work negligently and defectively (without pleading any particularity) thereby causing Mady to incur significant repair costs, and that Totalsitework had abandoned its subcontract. Mady pleaded a counterclaim claiming damages in the amount of $250,000. The law firm of record for Mady at this time was Shulgan Martini Marusic LLP (and particularly Barbara Opalinski of that firm).
5This action was referred to me by judgment of reference issued by Justice Pollack in another action on October 15, 2012. The first trial management conference was held before me on January 28, 2013. At this trial management conference, Irwin Ozier, present counsel for Mady, appeared as agent for Ms. Opalinski. Numerous lien claims were before me, including those of two parties in contract with Totalsiteworks, namely Crowle Fittings & Supply Ltd. (represented by Mr. Ozier’s firm) and a union, both of which claims total $48,030. I ordered that the claims concerning the Totalsiteworks subcontract proceed as a separate stream and that the next trial management conference in that stream take place before me on April 22, 2013.
6In the Totalsiteworks responding motion record there is reference to another action that was commenced by Totalsiteworks concerning this subcontract (“the Trust Action”). It is an action in Newmarket, Ontario that was issued on March 4, 2013. In the Trust Action Totalsiteworks claims $350,000 in damages for breach of contract and trust against Mady and for personal liability concerning Mady’s principals, and includes a claim on the bond issued for Mady concerning the subject project.
7The Totalsiteworks stream of lien claims came before me again on April 22, 2013. At this time, Mr. Ozier again appeared for Ms. Opalinski. I made orders for the exchange of affidavits of documents and productions, the preparation of a Scott Schedule and the holding of examinations for discovery, all of which I ordered be done by the end of August, 2013. I focused attention on the claims of Crowle and the union, as they appeared to be covered by the undisputed Totalsiteworks holdback. The amounts of those two claims were confirmed and those two lien claimants were excused from further participation in the reference. I ordered that the next trial management conference take place on September 16, 2013.
8In Totalsiteworks’ responding motion record there is a copy of a Statement of Defence and Counterclaim that was served by Mady and its principals in the Trust Action on June 18, 2013. This pleading was very much the same as the Mady Statement of Defence and Counterclaim in the Totalsiteworks lien action with the exception that the counterclaim that was raised in this pleading was $500,000 in damages for breach of contract, not $250,000. Furthermore, Mr. Ozier and his firm appear as counsel of record in this action.
9At the trial management conference of September 16, 2013, Ms. Opalinski appeared in person for Mady, as did Mr. Ozier. I learned that there had been little progress in the litigation of the Totalsiteworks stream. The parties had exchanged affidavits of documents, but had done neither a Scott Schedule nor examinations for discovery. Mr. Ozier advised that he expected to be retained by Mady within a week and that he expected to get instructions to bring a motion for security for costs. I ordered inter alia that two days of examination for discovery take place on November 25 and 26, 2013 and that the Mady motion for security for costs be brought before these discoveries, with the schedule for the said motion to be set by me in a telephone conference call.
10At this trial management conference on September 16, 2013, Mr. Baichoo informed me of the Trust Action and of Totalsiteworks’ intention to have that action referred to me to be heard together with the Totalsiteworks’ lien action. At the hearing of this motion, both counsel confirmed that this reference would proceed on consent.
11On November 18, 2013 the court received a letter from Mr. Ozier advising that he had just received the Mady file on November 15, 2013. He requested a telephone conference call with me to get orders delaying the discoveries and setting a schedule for the Mady motion for security for costs to take place prior to the new discovery dates. I arranged for such a conference call to take place on November 22, 2013.
12During the conference call of November 22, 2013 Mr. Ozier advised me that, as he had just received the Mady file from Ms. Opalinski, he was not in a position to proceed with the examinations for discovery on November 25 and 26, 2013, as I had ordered. Mr. Ozier also advised that he had instructions to move for an order for security for costs before the new discovery dates. The only explanation Mr. Ozier gave me at this time for Mady’s failure to move for security for costs within the schedule I had ordered on September 16, 2013 was that Mady had been conducting settlement discussions with Totalsiteworks, and decided not to comply with my directions in order avoid needless costs. Mr. Baichoo advised that any settlement discussions were minimal and certainly did not justify this conduct. He objected to the requested adjournment of the discoveries and the scheduling of the motion for security for costs, as he had prepared for the scheduled discoveries.
13At this time, I learned for the first time that my written directions concerning the September 16, 2013 trial management conference had not been distributed by the court.
14After consideration, I adjourned the set discovery dates to dates to January 29 and 30, 2014, and set a schedule for the Mady motion for security for costs that culminated in the hearing before me on January 3, 2014. But I also specified in my directions of November 22, 2013 that “Mady would have to explain its conduct as a part of its proposed security for costs motion on pain of a significant costs award against it if it failed to do so.”
15On or about December 2, 2013, Mady served its motion record for this motion. It contained an affidavit of the senior vice-president of Mady, Marko Juricic, sworn December 4, 2013. On or about December 20, 2013, Totalsiteworks served its responding motion record which contained an affidavit of its principal, Jerry Maheras, sworn December 20, 2013. Mady served its factum and book of authorities on December 31, 2013, which was quite late. Totalsiteworks served its factum and book of authorities on December 31, 2013 without the benefit of having seen the Mady factum as a result.
16At the hearing of the motion, I was informed that the claims of Crowle and the union had been resolved for an amount of about $43,000, which amount would be deducted from any judgment in favour of Totalsiteworks.
Leave and the initial onus:
17Under section 67(2) of the Construction Lien Act (the “CLA”) the moving party needs leave of the court to bring a motion for security for costs, as such a motion is not itself authorized per se by the CLA. Mady sought this leave in its Notice of Motion. Leave can only be given where the court determines either that the motion is “necessary” or would expedite the resolution of the issues in dispute.
18I have previously held (see Norseman Construction & Development Ltd. v. Emmanuel Evdemon, Marie Bedard and Scotia Mortgage Corporation, CV-12-452133, August 27, 2013) that in motions such as this where the action is pursuant to the CLA, the plaintiff is a corporation and the moving party is alleging that there is good reason to believe that the plaintiff does not have sufficient assets to pay the defendant’s costs, the issue of the leave under section 67(2) of the CLA is to be determined by the same test that is to be applied to determine whether the moving party has met its initial onus under Rule 56.01(1)(d) to show that “there is good reason to believe” that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs. If the moving party can show that there is such a “good reason,” there is a “necessity” for the purpose of section 67(2) of the CLA to achieve procedural fairness by ordering security for costs. This is all the more the case where the defendant has, as here, posted security for costs for the plaintiff’s claim.
19In the same decision, I relied upon the decision of Justice Lang in City Commercial Realty Services (Canada) Ltd. v. Bakich [2005] O.J. 6443 (Ont. CA) for guidance as to what such a “good reason to believe” must be. Her Honour pointed out that the moving party under this rule does not have to establish that the corporate plaintiff has insufficient assets to pay costs. All that has to be established is a “good reason to believe” that this is the case. Her Honour stated the following in paragraph 8: “Even though the onus is a reduced one, the moving party must still provide enough information about the corporation to raise a belief of insufficiency that goes beyond mere conjecture, hunch, or speculation.” She went on to state that the moving party needed to show “indicia of insolvency” or “instability,” such as a failure to make corporate filings, unpaid judgments or liabilities, a temporary dissolution, a significant disposition of assets, or the plaintiff as a single purpose entity.
20In reviewing the evidence presented by Mady, I am satisfied that Mady has established the grounds for “necessity” under section 67(2) of the CLA and has met its onus under Rule 56.01(d) of showing that there is “good reason to believe” that Totalsiteworks does not have sufficient assets in Ontario to pay Mady’s costs of defending the action. The primary basis for my decision in this regard is the evidence of unpaid judgments and liabilities. Firstly, Mady presented evidence that suggests a substantial unpaid tax liability on the part of the Totalsiteworks. In Mr. Juricic’s affidavit there is a Requirement to Pay (“RTP”) from the Canada Revenue Agency (“CRA”) dated May 3, 2013 issued to Mady concerning “Totalsiteworks Inc.” in the amount of $854,463.49. Mr. Maheras in paragraph 33 of his affidavit states that this is a tax debt of Totalsiteworks.
21Secondly, Mr. Juricic’s affidavit contains a report from the Corpa Group Inc. (“Corpa”) dated December 3, 2013 concerning the “asset investigation” that Corpa stated it performed on Totalsiteworks. A part of this report concerned the “credit inquiries” Corpa made of Totalsiteworks which, according to the report, showed inter alia several “collection matters” (8 matters totaling over $75,000) and several unpaid judgments in court files dating from 2009, 2012 and 2013 (6 judgments totaling over $180,000).
22This evidence alone is sufficient for my decision. In addition, there is the open admission by Mr. Maheras in paragraph 3 of his affidavit that Totalsiteworks is impecunious.
23I, therefore, rule that Mady has leave to bring this motion and has met its onus under Rule 56.01(1)(d) of showing that there is good reason to believe that Totalsiteworks does not have sufficient assets in Ontario to pay Mady’s costs.
Impecuniosity:
24One argument that Totalsiteworks presented to defeat the motion was that it is impecunious with a claim not devoid of merit that would be thwarted if it is required to pay security for costs. Mr. Clarke conceded in verbal argument that there is no issue that the plaintiff’s claim is not devoid of merit, and that, if impecuniosity is proven, the motion should not succeed. It is well established that where impecuniosity is proven in relation to a plaintiff with a claim not devoid of merit, the courts will not grant security for costs as to do so would create an injustice.
25However, Mr. Clarke argued that Totalsiteworks has not established its impecuniosity. The authority is also well established that the onus for proving the plaintiff’s impecuniosity rests on the plaintiff, and that this onus is a high one. Firstly, the plaintiff must satisfy the court that it has made “full and frank disclosure of its financial circumstances”; see the decision of Justice Perell in Montrose Hammond & Co. v. CIBC World Markets Inc. 2012 CarswellOnt 10456 at paragraph 34. Secondly, it must satisfy the court that assets are not available not only from the plaintiff itself, but also not from its shareholders, directors, officers and, if a privately held corporation, even from family members. In her decision in JV Mechanical Ltd. v. Steelcase Construction Inc. 2010 CarswellOnt 1522 (Ont. Master), Master Albert aptly quoted from the decision of Justice Roberts’ decision in Tecnorag Ltd. v. Atomic Energy of Canada Ltd. (2009), 2009 CarswellOnt 7517 (Ont. S.C.J.) in this regard:
The onus remains on the plaintiff to adduce sufficient evidence of impecuniosity through supporting financial documents or details. The plaintiff must satisfy the court that funds are not available from corporate owners, officers and even family members. The plaintiff is not entitled to avoid investigation of the financial condition of its principal owners, directors or officers by the simple stratagem of admitting impecuniosity. It must leave no material question unanswered.
26Has Totalsiteworks left no material question unanswered concerning the alleged lack of assets of itself, its corporate owners and its directors and officers? Mr. Baichoo argued that it has. He pointed to the following evidence in Mr. Maheras’ affidavit:
The income tax return for Totalsiteworks Inc. for the year 2011 which shows a negative taxable income.
The notice to reader financial statements for Totalsiteworks Inc. showing a negative balance sheet as at April 30, 2011.
A bank statement for a bank account in the name of Totalsiteworks Inc. for the period ending October 31, 2013 showing a negative balance.
A bank statement for a bank account in the name of Totalsiteworks itself for the period October 25, 2013 to November 25, 2013, showing a negative balance.
The RTP from CRA dated October 22, 2011 concerning Totalsiteworks Inc. showing a tax payable of $359,514. This was no doubt followed up with the RTP from CRA dated May 3, 2013 (in the amount of $854,463.49) that is referred to in Mr. Juricic’s affidavit.
Three letters of resignation dated April 24 and 30, 2012 from what Mr. Maheras describes as “the former shareholders, directors and/or officers” of Totalsiteworks, Jose Goulart, Paula Martins-Goulart and Pauline Vavoulis. These letters Mr. Maheras describes as being letters of resignation from their positions as shareholders, directors and officers.
A bank statement for a bank account in Mr. Maheras’ own name for the period ending June 21, 2013 showing a negative balance.
A tax return for Mr. Maheras showing a total income for 2012 of $49,500.
Statements made by Mr. Maheras in his affidavit such as the following: he is the “principal” of Totalsiteworks; Totalsiteworks has no assets (real or otherwise) as confirmed by the Corpa report; he is currently unemployed and has no assets to liquefy or borrow against to raise funds; and the tax liability of Totalsiteworks Inc. is also that of Totalsiteworks.
27In my view, this does not satisfy the heavy onus on the plaintiff to show that it is impecunious. Many questions are left unanswered. While Totalsiteworks Inc. appears to have a heavy tax burden and negative income, there is no evidence of the relationship between Totalsiteworks Inc. and Totalsiteworks other than Mr. Maheras unsubstantiated statement that the tax burden belongs to Totalsiteworks and the fact that the CRA served an alleged debtor to Totalsiteworks, Mady, with the RTP for Totalsiteworks Inc. No evidence was presented as to why the CRA would have served Mady with an RTP concerning Totalsiteworks Inc.
28Mr. Baichoo argued that the Corpa report was proof of a relationship between the two entities when it stated on page 4 that “Totalsiteworks Construction and Totalsiteworks Corporation are merged”; but there is no mention of Totalsiteworks Inc. in this statement. In fact, this statement, if anything, only creates further confusion by introducing a new name, Totalsiteworks Corporation, about which there is no further evidence. Therefore, the court is left wondering what conclusions can be drawn about Totalsiteworks from the presented financial documentation and information concerning Totalsiteworks Inc. Significantly, no financial statements or tax returns for Totalsiteworks itself were produced.
29Furthermore, the letters of resignation from the three alleged shareholders, directors and officers also leave unanswered questions. Mr. Maheras describes these persons as former shareholders of Totalsiteworks; but the letters of resignation concern only their positions as directors and officers of Totalsiteworks. This leaves one wondering whether these persons were ever shareholders and, if they were, whether they still are. No shareholder register for Totalsiteworks was produced. If these persons are still shareholders, there is no evidence as to the means these persons have to pay security for costs if in fact Totalsiteworks is without assets.
30Finally, the evidence of the assets of Mr. Maheras himself is quite thin. There is no financial statement or other documentation showing what, if any, assets he may have, such as a home or other real property. He just states that he does not have assets he can liquefy or borrow against. There is no substantiation for this bald statement.
31Therefore, I find that Totalsiteworks has not established that it is impecunious. However, this does not conclude the motion, as Rule 56.01 requires that I determine in the end whether an award of security for costs is “just,” particularly given the conduct of Mady.
Delay in bringing the motion:
32The second major argument that Totalsiteworks gave to defeat the motion was that Mady delayed in bringing this motion without proper explanation. It argued that this delay prejudiced Totalsiteworks and contravened my directions of September 16, 2013. It argued that Mady should be denied its motion as a result.
33As I stated in my decision in decision in European Flooring Contract Services Ltd. v. Toddglen ILofts Ltd. <https://www.minicounsel.ca/scj/2013/6445 2013 ONSC 6445 at paragraph <https://www.minicounsel.ca/scj/2013/6445 23, I find the decision of Master Graham in Pelz v. Anderson https://www.canlii.org/en/on/onsc/doc/2006/2006canlii39571/2006canlii39571.html 2006 39571 (ON SC), [2006] O.J.No. 4726 to be a useful guide as to the test to brought to bear on this issue of delay. In that case, Master Graham reviewed the history of cases concerning this issue of delay in motions for security for costs, and made the following three conclusions: (1) motions for security for costs should be made promptly after the defendant learns that it has a reasonable basis for bringing the motion; (2) the moving party should not be entitled to security for costs if it is proven that the plaintiff has been prejudiced by the delay in bringing the motion; and (3) the moving party must in any event and regardless of the issue of prejudice, explain the delay in bringing the motion and a failure to do so is fatal to the motion. In the motion in that case, the defendant had waited until after production, discovery, mediation, the scheduling of trial and the pretrial conference to bring the motion. There was no explanation for this delay, and the motion was dismissed.
34Mr. Baichoo pointed to three delays in bringing this motion that Mady has not properly explained or has not explained at all. The first one is an alleged delay after Mady became aware of the CRA’s RTP concerning the tax liability of Totalsiteworks Inc. As stated above, Mady relies upon an RTP in part to justify the bringing of this motion. Mr. Maheras’ affidavit contains an email from Ms. Opalinski to Mr. Baichoo dated June 21, 2012 wherein Ms. Opalinski advised that she had received an RTP and that as a result no monies would be paid out to Totalsiteworks’ trades as Totalsiteworks had previously directed.
35I asked Mr. Clarke as to whether he had contacted Ms. Opalinski to get any clarification as to what RTP this was, as it is not attached to the email. He stated that he had not done so. He acknowledged that this RTP is probably still in the possession of Mady. As stated above, Mr. Maheras’ affidavit does contain an RTP concerning Totalsiteworks Inc. dated October 20, 2011 in the amount of $359,514. I draw the inference that the RTP that Ms. Opalinski was referring to in her email was probably this one.
36Therefore, as of June 12, 2012, Mady was in possession of an RTP concerning Totalsiteworks Inc. in the amount of $359,514. Yet, Mr. Juricic states that it was the later RTP of May 3, 2013 in the amount of $854,463.49 that gave him concerns about Totalsiteworks’ ability to pay Mady’s costs. There is no explanation as to why the earlier RTP of October 20, 2011 did not raise such a concern and why nothing was done about it, particularly as by June 12, 2012 the Totalsiteworks lien action was underway and Mady had posted security for the Totalsiteworks lien.
37Mr. Baichoo pointed to a second alleged delay, namely one arising from the conflict of interest that caused Mady to initially hire a lawyer other than Mr. Ozier and that led to Mady hiring Mr. Ozier no sooner than the fall of 2013 when this conflict was eventually resolved. The conflict apparently concerned the fact that Mr. Ozier’s firm also represented Crowle. Mr. Juricic states in his affidavit that Mady’s initial counsel did not advise Mady regarding a potential security for costs motion. I agree with Mr. Baichoo that this should be of no concern to me, as that is an issue between Mady and its initial counsel. Mr. Baichoo went on to argue that, even if it was an issue for my consideration, it should be given no weight, as Mr. Ozier had already by June, 2013 been retained by Mady in the Trust Action and could have given Mady advice on any motions for security for costs Mady as early as that time. I make no findings on this submission.
38Mr. Baichoo’s pointed to a third delay, namely the one that followed my September 16, 2013 directions which required that Mady’s motion for security for cost be brought before November 25 and 26, 2013, the dates I had ordered for examinations for discovery. The evidence is that Mr. Ozier received the Mady file from Ms. Opalinski no sooner than November 15, 2013, namely 2 months after my directions, despite many requests by Mr. Ozier to Mady to have the file transferred much sooner.
39The only explanation for this delay offered by Mr. Juricic in his affidavit was the following: “Settlement discussions have been ongoing since the commencement of this action, and I always believed that settlement with Totalsiteworks to resolve this lien claim was possible.” These “settlement discussions,” he stated, broke down on November 26, 2013, and only then could Mady instruct its counsel to move for security for costs. The reason Mady could not instruct counsel to bring a motion for security for costs any sooner, according to Mr. Juricic, was that Mady was attempting to keep costs in this matter to a minimum and, until settlement discussions allegedly broke down, “it was not necessary to bring this motion.”
40This explanation lacks credibility. Firstly, there is no corroboration of the existence of these settlement discussions other than Mr. Baichoo’s statements in argument that settlement discussions increased after he demanded a further and better affidavit of documents, a demand which happened by letter dated October 2, 2013. This is not evidence. What I had expected to see from Mady, and did not receive, was evidence of specific dates on which settlement correspondence was exchanged and redacted versions of at least key settlement correspondence. The need for this evidence is particularly acute in light of Mady’s position that it became concerned in May, 2013, after two trial management conferences, that Totalsiteworks did not have the ability to pay Mady’s costs. Secondly, Mr. Juricic’ statement that settlement discussions justified Mady’s delay in moving for security for costs and that these settlement discussions had been ongoing since the commencement of this action begs the question as to why Mr. Ozier raised the prospect of a motion for security for costs at all on September 16, 2013, as he did. Thirdly, Mr. Juricic’s explanation is internally contradictory. On the one hand, he states that Mady “could not” instruct counsel to bring a motion sooner than it did, but, on the other hand, he states that until the settlement discussion allegedly broke down, the motion “was not necessary.” This statement is, in my view, an indirect admission that Mady simply decided on its own not to bring the motion before the end of November, 2013, despite my September 16, 2013 and earlier directions.
41I find that Mady has delayed in bringing this motion without proper or any explanation. Firstly, since Mady is relying upon the May 3, 2013 RTP as a major justification for this motion, it should have been concerned about Totalsiteworks’ ability to pay costs as early as June, 2012 when it received an earlier RTP concerning the same entity. There is no explanation as to why it was not so concerned and why it did nothing about that RTP. Secondly, the assertion of settlement discussions sufficient to justify a delay in bringing the motion despite Mady’s alleged concern and my directions, lacks credulity. I had asked for an explanation of Mady’s conduct in my November 22, 2013 directions, and I find that I have not received a proper one or one at all.
42Mr. Clarke argued that this delay did not prejudice Totalsiteworks, as the litigation, according to Mr. Clarke, is still in its infancy. Examinations for discovery and trial have not taken place. I agree more with Mr. Baichoo on this point, however. Not insignificant costs have been incurred by Totalsiteworks, such as the preparation of an affidavit of documents, the attendance at four trial management conferences, the preparation for examinations for discovery, and the preparation of a Scott Schedule, a copy of which was delivered to me at the argument of the motion. Mr. Baichoo’s argument is that, had Mady brought its motion in a timely way, Totalsiteworks would have had an opportunity to more seriously consider whether to continue with this action, particularly as, according to him, the CRA will be the primary beneficiary of any judgment. I find that there has been some prejudice to Totalsiteworks that resulted from Mady’s delay.
43Mr. Baichoo made another argument concerning prejudice that I do not agree with. He argued that the Mady delay caused the Totalsiteworks tax liability to increase from $359,514 as shown in the October 22, 2011 RTP to $854,463.49 as shown in the May 3, 2013 RTP. Putting aside the issue of the unsubstantiated connection between Totalsiteworks Inc. and Totalsiteworks, as discussed earlier, I would have difficulty drawing any causal connection between the Mady delay and this increased tax liability even if it did apply to Totalsiteworks. This I do not accept.
44But, regardless of the issue of prejudice, as Master Graham made it clear in Pelz, a failure to explain a delay in bringing a motion for security for costs can be itself fatal to the motion. For the reasons stated above, I so find in this case.
Other issues:
45Other issues came up in the course of argument. There was the issue of the Mady counterclaim. Mady pleaded a $250,000 counterclaim in the Totalsiteworks lien action, an amount that exceeds the amount of Totalsiteworks claim (reduced to account for the subtrade settlements). I also noted that there is a $500,000 counterclaim from Mady in the Trust Action that will be referred to me. As I noted in my decision in European Flooring Contract Services Ltd. at paragraph <https://www.minicounsel.ca/scj/2013/6445 33, there is considerable case authority for the proposition that, where the real “driver” of the litigation will be defendant’s counterclaim and where the counterclaim arises from the same facts and circumstances as does the plaintiff’s claim, the defendant can be denied security for costs or have its security for costs entitlement significantly curtailed.
46The pleadings of these counterclaims appear both to pertain to the unparticularized allegations of negligent, deficient and uncompleted work on the part of Totalsiteworks, namely the very work that is the subject matter of the Totalsiteworks claim. Neither Mr. Juricic in his affidavit nor Mr. Clarke in his argument clarified which of these counterclaims (the one in the Totalsiteworks’ lien action or the one in the Trust Action) are for the accurate amount and what they contain.
47I draw an inference that the Mady counterclaim will probably in the end be more in the range of the $500,000 pleaded by Mady in the Trust Action as that pleading was made over a year after the Mady pleading in the lien action. In a year, Mady should have obtained further details of its claims against Totalsiteworks. The Mady pleading in the Trust Action was also prepared by Mr. Ozier, Mady’s present counsel of record in these matters. With a counterclaim of $500,000, there is a likelihood that the real driver of these proceedings will be the Mady counterclaim, thereby bolstering my decision not to award security for costs.
48Another issue came up concerning Mady’s lack of “clean hands.” I do find that Mady deliberately breached my September 16, 2013 directions concerning the motion for security for costs without justification and without agreement from Totalsiteworks, thereby further bolstering my decision not to award security for costs. I noted during the argument that Mr. Clarke in his factum asserted that Mady had not knowingly breached my directions as the court had not circulated the written version of my September 16, 2013 directions. I pointed out to Mr. Clarke that there was no evidence of this in the motion materials, and that there was no evidence of this in fact as Mady’s counsel (both past and present) were present when I verbally issued my directions on September 16, 2013. Mr. Clarke withdrew the comment.
49However, Mr. Baichoo made further submissions on this issue. He pointed to certain correspondence from Mr. Juricic to Mr. Maheras that was inflammatory in tone. I draw no conclusions from this correspondence in this regard, as I note that parties often make comments to each other in the heat of a dispute that they do not mean. He also pointed to what he alleged was an inadequate affidavit of documents from Mady. I also draw no conclusion on this point, which can only be resolved by way of a separate motion.
Decision:
50On account of the defendants’ unexplained or improperly explained delay in bringing this motion, its breach of my directions and its counterclaims, I do not find that it would be “just” in the circumstances to award Mady security for costs, and I therefore exercise my discretion by denying the motion.
Costs:
51I required that both Totalsiteworks and Mady submit Costs Outlines at the argument of the motion, which they did. The Totalsiteworks Cost Outline shows a substantial indemnity costs claim for the motion of $13,066.53 (inclusive of tax) and a partial indemnity costs claim of $8,980.45 (inclusive of costs). It is not clear which of these two is being claimed. Mady submitted a Costs Outline which shows a substantial indemnity costs claim of $9,827.34 (apparently excluding tax) and a partial indemnity costs claim of $6,414.84 (apparently excluding tax). Again, it is not clear which of these two is being claimed.
52I make the following order concerning costs. Those parties seeking costs in relation to this motion must serve and file written submissions in that regard of no more than 2 pages on or before January 20, 2014. Any responding submissions must be in writing and must be served and filed on or before January 29, 2014. Reply material, if any, must be served on or before February 4, 2014.
MASTER C. WIEBE
DATE: January 9, 2014