SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: C-426-13

DATE: 2014-01-02

IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. C.30

RE: Royal Windsor Mechanical Inc., Plaintiff/Responding Party

and

Devlan Construction Ltd. and Peoplecare Inc., Defendants/Moving Party

BEFORE: The Honourable Mr. Justice P.J. Flynn

COUNSEL: Michelle Theberge, Counsel for the Plaintiff/Responding Party

Robert J. Kennaley, Counsel for the Defendant/Moving Party, Devlan Construction Ltd.

HEARD: November 14, 2013

RULING

[1] The Defendant moves for an order directing that the Plaintiff post security for the Defendant’s costs in the sum of $35,000, without prejudice to the Defendant’s right to seek further security for costs at a later stage.

[2] Because this is a Construction Lien Act matter, the Defendant required leave of this court for the motion to be heard. Leave was granted. The motion was made on September 13, 2012. The Plaintiff filed a last minute Responding Motion Record at the commencement of the hearing. The Affidavit of Bruno DeGasperis was only sworn November 12, 2013. It contains some personal income assets and expense statements in respect of Mr. DeGasperis, some financial records for the Plaintiff and various other documents evidencing debts.

[3] Once it has been established that one of the factors in Rule 56.01 obtains, the Defendant is entitled to an order for security for costs unless the Plaintiff can establish impecuniosity or that justice demands that it be allowed to proceed without posting the security. (See: Quick Refunds v. Leroy Dundas and Karel Dundas, 2010 ONSC 3927)

[4] Here, I am satisfied that the costs award made by Sloan J. on May 30, 2013, yet remains unpaid. Hence the threshold is met by the Defendant.

[5] Moreover, there is good reason to believe that the Plaintiff corporation lacks assets in Ontario sufficient to satisfy an order for costs in this case.

[6] There are more than 60 actions outstanding in which this Plaintiff is a party. There are at least two Writs for Seizure and Sale against this Plaintiff amounting to over $100,000.

[7] In February 2013, this Defendant was served with a Canada Revenue Agency Requirement to Pay in the amount of $827,762 out of any amount that would become payable to the Plaintiff. This Defendant also received a Garnishment Notice from the Plumbers’ Union for $151,941. That was later withdrawn, but there is no evidence as to how or if it was satisfied.

[8] This Plaintiff’s sub-trades have commenced actions in respect of the project claiming some $158,000.

[9] So, the Defendant has a prima facie right to an order for costs, unless the Plaintiff can establish that it is impecunious and that the merits of the case demand that the action be permitted to proceed without security for costs, that is the Plaintiff must show that it would be unjust to grant the order sought.

[10] That means that the Plaintiff has the onus to establish that it cannot raise security for costs even from its own shareholders by selling assets, borrowing or otherwise.

[11] Finally, there must be compelling evidence that the Plaintiff’s suit will be stopped by its inability to raise the security before such a motion is defeated.

[12] There is high burden on the Plaintiff to tender detailed evidence demonstrating that the Plaintiff is “impoverished or needy”.

[13] It is not enough to merely show hardship.

[14] The material presented by the Plaintiff in this case certainly shows some financial difficulties. It is in a tumult of litigation. But I am not satisfied that the Plaintiff’s responding material demonstrates that it is impoverished or needy, nor that the corporation or the Plaintiff’s sole shareholder are incapable of raising the required security. Nor am I satisfied that the order sought will stop the Plaintiff in its tracks in this action.

[15] The responding material is very sparse on financial disclosure, especially as regard the Plaintiff’s bonding facility.

[16] For example, in November of 2012, the Plaintiff received an order vacating the registration of a Claim for Lien by the lien claimant, Ben Air System Inc. by depositing security in the form of a Berkeley Insurance Company Lien Bond in the amount of $44,314, together with $11,078 as security for costs, for a total amount of security of $55,391.76. The responding material does not disclose who stood behind the bond. Nor am I satisfied that there is complete financial disclosure showing the income, expenses and liabilities of the corporation and its shareholder.

[17] Interestingly, the Plaintiff has recently commenced another lawsuit - the 63rd in which it is a party.

[18] I am of the view that the Plaintiff has not led evidence of “robust particularity” with full and frank disclosure of the financial circumstances of the Plaintiff corporation and its principal.

[19] The lien claim in this case is for $352,345. This has been “bonded-off” with a posted bond for $292,829.57. Altogether there are posted bonds on the project for $490,441.

[20] I am not satisfied that the Plaintiff is impecunious. Nor is there a compelling reason in the interests of justice not to make the order sought.

[21] The Defendant has sought an order for security for costs in the amount of $35,000 and given that this represents about 10% of the lien claimed, I am satisfied that an order for that amount be made.

Costs

[22] The Defendant has been completely successful in this matter and is presumptively entitled to its costs. I will fix those costs after receiving the parties’ submissions as follows:

(a) on or before the 31st of January 2014, the Defendant shall serve and deliver to me at my chambers in Kitchener its Form 57B Costs Outline, together with a Bill of Costs and any relevant Offer to Settle. The Costs Outline may not be augmented by more than two double spaced pages; and

(b) on or before February 14, 2014, the Plaintiff shall serve and deliver its Form 57B Costs Outline, together with any relevant Offer to Settle.

P.J. Flynn J.

Released: January 2, 2014