Court File and Parties

COURT FILE NO.: 11-CV-11982-OOCM

MOTION HEARD: 20140512

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Charose Holdings, LLC, Plaintiff

AND:

Edible Arrangements International, Inc., Defendant

BEFORE: Master Lou Ann M. Pope

COUNSEL:
Sheri-Lynn Medaglia, for the Plaintiff

Geoffrey Grove, for the Defendant

HEARD: May 12, 2014

REASONS FOR Endorsement

[1] This security for costs motion is opposed by the plaintiff on two grounds; firstly, that the plaintiff has assets in the State of Michigan, U.S.A., in excess of any amount that would be required to satisfy a cost order and that such order can be enforced pursuant to provisions of reciprocal enforcement legislation in Michigan. Secondly, the motion is opposed on the basis of the defendant’s delay in bringing the motion.

[2] There is no issue that the plaintiff is a corporation incorporated in the State of Michigan and that it has insufficient assets in Ontario to pay the costs of the defendant (rules 56.01(1)(a) and (d)). The plaintiff has not claimed to be impecunious. However, it has claimed that an order for security will deprive it of its cause of action.

Background

[3] On March 30, 2006, the parties entered into a Franchise Agreement (“agreement”) whereby the plaintiff, franchisee, intended to sell edible fruit arrangements in the City of Windsor, Ontario. The defendant, franchisor, is incorporated pursuant to the laws of the State of Connecticut, U.S.A. The parties were not strangers to each other at the time the agreement was signed. In fact, the plaintiff had been operating a similar franchise with the defendant in Michigan prior to the subject agreement.

[4] The agreement was for a term of ten years with the franchisee having a right to renew at the expiration of the initial term for one successive term of ten years. The plaintiff paid a deposit of $20,000 USD towards the initial $25,000 franchise fee in exchange for the exclusive rights to the territory. The deposit was non-refundable and has not been returned to the plaintiff.

[5] Under the terms of the agreement, the plaintiff had to secure a suitable location to operate the business within 120 days of the agreement being executed with the defendant’s approval. When the plaintiff had not secured a location by the expiry of 120 days, it is alleged that the defendant extended the time and assisted the plaintiff in its efforts to find a suitable location. It is further alleged that the defendant made material representations to the plaintiff that the agreement would not be terminated pending the securing of a location. By November 27, 2006, when a location had not been secured, the defendant terminated the agreement. Allegedly, the defendant continued to support the plaintiff’s efforts to secure a location; however, by March 2007 the defendant refused to enter into a new franchise agreement with the plaintiff.

[6] This action was commenced on October 21, 2008. The plaintiff claims that it suffered damages including loss of profit, loss of economic opportunity and loss of business reputation and goodwill as a result of the defendant breaching the agreement. It seeks damages for breach of contract of $250,000, breach of fiduciary duty of $250,000, return of the deposit of $20,000 USD, and punitive damages of $100,000.

[7] The parties agreed to delay service of the statement of defence which was ultimately served on July 20, 2009.

[8] The plaintiff set the action down for trial on February 28, 2011, not on consent of the defendant. The plaintiff did so, according to its counsel, to avoid an administrative dismissal under rule 48.14(1). Given that examinations for discovery had not been completed by the time of the pre-trial conference on December 8, 2011, the action was struck from the trial list and a timetable order was made for completion of the balance of the steps, including mediation. The action was to be restored to a trial list by November 30, 2012.

[9] At the examination for discovery of the defendant representative on December 9, 2011, Mr. Alexander refused to answer four questions, including a request to produce financial documents for the Edible Arrangements franchise located on Howard Avenue in Windsor, Ontario. The Howard Avenue franchise is the location where a subsequent franchisee operated an Edible Arrangements franchise.

[10] As the action was not restored to the trial list by November 30, 2012, the plaintiff arranged for a case conference to be held on February 1, 2013. In the meantime, examinations for discovery of the plaintiff were held on January 23, 2013. At the case conference, the parties consented to timelines being extended to satisfy undertakings, hearing of discovery motions, completion of any follow-up discoveries of the plaintiff, mediation and to restore the action to the trial list by August 14, 2013, which was the date scheduled for the second pre-trial conference.

[11] There is some dispute as to whether the parties agreed to extend the time for the plaintiff to satisfy its undertakings. Based on the evidence, the defendant agreed to extend the time to April 15, 2013; however, the plaintiff requested April 30, 2013. As such, there was no agreement regarding an extended timeline.

[12] In any event, by the pre-trial conference on August 28, 2013, the plaintiff had not satisfied all of its undertakings despite consenting to a prior timetable order that they be satisfied by March 23, 2013. The pre-trial was not held due to the outstanding steps. Notwithstanding that the plaintiff had not satisfied its undertakings, the plaintiff’s pre-trial conference brief stated that there were no contemplated motions and that the parties were ready for trial. Clearly that was inaccurate given the plaintiff’s stated intentions at the pre-trial to deliver an expert report on damages, and to move on refusals given by the defendant representative at his discovery held in December 2011. The plaintiff was granted a further 90 days to comply with its undertakings and 60 days to advise the defendant whether it intended on delivering an expert report on damages. The defendant made its intention known at the pre-trial that it was considering bringing a security for costs motion.

[13] On October 25, 2013, the plaintiff advised that it intended to retain chartered accountant, Andrea Pontoni, as a damages expert. There is some dispute as to whether Mr. Pontoni is in a conflict of interest as he was involved in the sale of the Edible Arrangements franchise on Howard Avenue some three years prior. On December 12, 2013, the plaintiff advised of Mr. Pontoni’s prior involvement and requested the defendant’s position on whether Mr. Pontoni was in a conflict of interest. The defendant’s position was two-fold; firstly that Mr. Pontoni ought to determine whether he is in a conflict, and secondly, that the defendant was unable to properly assess the conflict issue without further information as to the nature of Mr. Pontoni’s prior involvement with the Howard Avenue franchise.

[14] At the conclusion of the pre-trial on August 28, 2013, a case conference was scheduled for December 13, 2013 to determine the readiness for a pre-trial conference. At that case conference the plaintiff indicated that Mr. Pontoni required certain financial documents from the defendant that pertain to the Howard Avenue franchise, which had been refused by the defendant at its discovery held in December 2011. Thus, the plaintiff was ordered to bring any motion for production of those documents based on the defendant’s refusals by February 28, 2014. I did not grant the plaintiff leave to bring that motion given that leave to bring that motion was in issue, but merely a timeline to do so.

[15] In early January 2014 the plaintiff provided more detail of Mr. Pontoni’s involvement with the Howard Avenue franchise taking the position that he was not in conflict.

[16] The plaintiff brought its refusals motion returnable March 25, 2014. This motion was brought late, beyond the February 28 timetable order.

Plaintiff’s late filing of additional material

[17] The plaintiff delivered two affidavits beyond the timelines ordered at the case conference held on December 13, 2013. At the case conference the plaintiff consented to serving its responding material on this motion by March 14, 2014. The defendant opposes the late filing of these documents.

Affidavit of Dr. Patrick Charles sworn May 2, 2014

[18] The affidavit of Dr. Patrick Charles was served on May 2, 2014, thus it was served seven weeks late. More importantly, it was served after the defendant served its factum and book of authorities in accordance with the timetable order, and one week before the hearing of this motion. Subsequently on May 8, 2014, the defendant served a reply factum and reply book of authorities three days after all the motion material was to be filed and the motion confirmed.

[19] Dr. Charles is a director and officer of the plaintiff. He attests to the estimated current market value of the plaintiff corporation. In support, a quarterly Balance Sheet for the plaintiff corporation as of May 1, 2014 is attached to his affidavit.

[20] The extreme late filing of this affidavit, just one week before the hearing, caused the defendant to have to respond on an urgent basis.

[21] The plaintiff provided no valid reason for the late filing of this affidavit. The Balance Sheet was a “quarterly” Balance Sheet; therefore, it is reasonable to assume that the plaintiff was able to produce the previous quarterly balance sheet and the balance of Dr. Charles’ evidence by the March 14, 2014 timeline. This is especially so given that the plaintiff adduced the plaintiff’s Profit & Loss Statement for the period January through December 2013 with its original motion material. I find no evidence in Dr. Charles’ affidavit that could not have been adduced by the March 14 timeline.

[22] There must be some consequences for failing to comply with a court ordered timetable otherwise wilful and unexplained breach of such orders make a mockery of the justice system.

[23] The late filing of this affidavit did not delay the motion. However, given that there was no acceptable reason for the lateness, the extreme delay, and the fact that there was a consent timetable order for the delivery of the motion material, I am inclined to refuse leave to file this affidavit.

Affidavit of Fezan Khalil sworn May 5, 2014

[24] The plaintiff served this supplementary affidavit on May 5, 2014, one week prior to the hearing of the motion. Mr. Khalil is an associate lawyer with Shulgan Martini Marusic, LLP, lawyers for the plaintiff. His first affidavit is included in the plaintiff’s motion material. In this supplementary affidavit, he attests to the issue of whether a judgment in this action can be enforced in Michigan.

[25] I do not accept the plaintiff’s contention that the defendant raised the enforcement issue first which necessitated providing further evidence. In fact, Mr. Khalil’s evidence at paragraph 63 of his first affidavit provides that Michigan’s Uniform Foreign Money Judgments Recognition Act, § 691 (2008), “allows foreign money judgments to be enforced in the State of Michigan with relative ease. Accordingly, if the plaintiff is not successful, Edible Arrangements could enforce a cost Order made in its favour in the State of Michigan.” In its factum, the defendant made submissions on the proposition that assets should be conveniently available for enforcement pursuant to the 2007 decision in Bouganim v. Embee Properties Ltd., [2007] O.J. No. 2253. This decision was available to both parties prior to preparation of their respective motion material and, as such, ought to have been addressed by the plaintiff in its original material. This is particularly so given the evidence of Mr. Khalil in his first affidavit.

[26] Further, Mr. Khalil relies on information provided to him by Julian Poota, a Michigan attorney; however, he fails to state when he was in contact with Mr. Poota. In my view, it is reasonable to assume that Mr. Khalil was able to contact Mr. Poota prior to the timeline for delivery of the plaintiff’s motion material.

[27] Mr. Khalil also relies on information provided to him by Sheri-Lynn Medaglia, plaintiff’s counsel, regarding the process of enforcing Ontario judgments in Michigan. Mr. Khalil and Ms. Medaglia are associates in the same law office. Again, it is reasonable to assume that Mr. Khalil was able to obtain this information from Ms. Medaglia prior to the timeline for delivery of the plaintiff’s motion material.

[28] Mr. Khalil also relies on information provided to him on May 5, 2014 by a clerk from the Wayne County Court Clerk’s office regarding the procedure for enforcing foreign judgments. Again, it is reasonable to assume that Mr. Khalil was able to contact the Clerk’s office prior to the timeline for delivery of the plaintiff’s motion material.

[29] I find that the plaintiff has not provided a valid reason for the late filing of this affidavit. Further, there is no evidence in this affidavit that could not have been served by the timetable order.

[30] For those reasons, I decline to grant leave to the plaintiff to late file Mr. Khalil’s supplementary affidavit.

Motion for Security for Costs

[31] The defendant relies on two factors set out in subrules 56.01(1)(a) and (d) for an order that the plaintiff pay security for costs. Subrule (a) provides that a court may make such order for security for costs as is just where it appears that the plaintiff is ordinarily resident outside Ontario. Subrule (d) provides that such an order may be made where it appears that the plaintiff is a corporation and there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant.

[32] The decision to order security for costs is discretionary and the court considering the motion is afforded broad latitude to make an order that is just in the circumstances (Morton v. Canada (Attorney General) (2005), 2005 6052 (ON SC), 75 O.R. (3d) 63 at para. 38 (S.C.J.)).

[33] The courts have established a two-step inquiry when considering whether to order security for costs.

[34] Initially, the onus is on the defendant to demonstrate that the plaintiff falls into one of the subrules of 56.01(1). The onus is not a heavy one. For example, the defendant need only demonstrate that “it appears” that the plaintiff is a corporation and there is “good reason to believe” that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant. Only if the defendant succeeds with the first stage does the inquiry move to the second stage.

[35] At the second stage the onus shifts to the plaintiff. The plaintiff can either demonstrate that it is not a non-resident or that it has sufficient assets in Ontario as the case may be.

[36] At the second stage, the merits of the case remain a relevant factor. If it is found that the plaintiff has insufficient assets in Ontario, the court may exercise discretion as to whether an order for security for costs would be “just” in all of the circumstances. An inquiry into all factors must be taken including the merits of the case, balancing the interests of the parties, review of the financial circumstances of the plaintiff and the effect of an order.

Subrule 56.01(1)(a)

[37] The defendant has met its onus under this subrule as there is no issue between the parties that the plaintiff is ordinarily resident outside Ontario.

Subrule 56.01(1)(d)

[38] It is also conceded that the plaintiff does not have sufficient assets in Ontario to pay a costs order. The plaintiff asserts that it has sufficient assets in Michigan to pay the defendant’s costs and that those assets are easily exigible.

[39] I disagree with the plaintiff’s submissions at paragraphs 56 through 58 of its factum to the effect that the defendant has not satisfied the first part of the test. The plaintiff’s submissions are confusing given that throughout its factum and oral submissions, it was argued that the plaintiff has sufficient assets in Michigan to satisfy a costs order. Nowhere does the plaintiff submit that it has sufficient assets in Ontario, which is the test under the rule. To review, subrule (d) requires that the defendant show that it appears 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 defendant. The defendant relies on the admission in the statement of claim that the plaintiff is a Michigan corporation and the material fact set out in the statement of defence that the plaintiff is the defendant’s former franchisee in the Windsor, Ontario area. Furthermore, the plaintiff’s own evidence is that the corporation was used only for the purpose of operating an Edible Arrangements franchise in Grosse Pointe, Michigan, and that the corporation was not resident in Ontario (Responding Party’s Motion Record, Affidavit of Fezan Khalil, para. 67). As such, I find this argument to have no merit.

[40] As the defendant has met its onus to show good reason to believe that the plaintiff has insufficient assets in Ontario, the burden shifts to the plaintiff to convince the court that an order for security would be unjust.

[41] It is the plaintiff’s position that it has sufficient assets in Michigan and that those assets are easily exigible to satisfy a cost order.

[42] The plaintiff relies on Smallwood v. Sparling (1983), 1983 1876 (ON SC), 40 O.R. (2d) 796, a decision of Master Peppiatt, where he granted the motion for security for costs despite there being reciprocal enforcement legislation in Newfoundland. He found there to be a complete lack of evidence as to the plaintiff’s assets within the reciprocating jurisdiction.

[43] The master concluded that the principle to be extracted from the authorities was that where there is reciprocal enforcement legislation and the plaintiff has assets within the reciprocating jurisdiction, security for costs will not be ordered, but where there are no such assets, security will be ordered notwithstanding the existence of the reciprocal enforcement legislation (para. 12).

[44] The plaintiff failed to point out to the court that the master’s decision in Smallwood was appealed and affirmed at (1983), 42 O.R. (2d) 3048 (H.C.J.). The defendant relies on the appeal decision. It is important to note that Galligan J. did not agree with the master’s conclusion stating that, in his opinion, the authorities did not go so far as to support such a broad proposition (para. 5). Rather, he held at para. 10 that:

The burden of Ontario authority is that when a non-resident plaintiff resides in a reciprocal jurisdiction and has in that jurisdiction sufficient assets which can conveniently be realized upon, an order for security or for increased security for costs is unnecessary and therefore usually it will not be made. [Emphasis added.]

[45] Galligan J. came to the same conclusion as the master based on the lack of evidence regarding the plaintiff’s assets in the reciprocating jurisdiction.

[46] With respect to sufficiency of assets, Master Dash stated in Marcon Custom Metals Inc. v. Arlat Metals Inc., [2003] O.T.C. 1046 (Sup. Ct.) at para. 24:

Knowledge as to the current assets and liabilities of the company lies within the knowledge of the company’s witness. . . . It bears repeating that the onus is on the plaintiff resisting an order for security for costs to prove the sufficiency of its assets by convincing evidence. It is incumbent on the corporation to provide information and supporting documentation as to the current status of its assets and liabilities, particularly liabilities secured against those assets put forward as available to pay a judgment for costs. (para. 19)

[47] Several factors apply in examining the evidence as to the sufficiency of assets, as follows:

(a) The court must consider critically the quality as well as the sufficiency of the assets presently held and whether they are bona fide assets of the company;

(b) It is insufficient that the responding party shows that it is profitable or that it has equity. There must be demonstrated exigible assets.

(c) The court must consider the liabilities of the plaintiff corporation as well as its assets. In particular the court should consider whether the assets to which the plaintiff claims the defendants can look for its costs are secured to another creditor. If the assets are subject to security, they may not be available to a defendant who tries to execute (Marcon, at para. 4).

[48] The evidence is that the plaintiff was incorporated in 2005 pursuant to the laws of the State of Michigan and has continued to conduct business in Grosse Pointe, Michigan, as an Edible Arrangements franchise for some eight years. The plaintiff’s Profit and Loss Statement for the 2013 fiscal year indicates that the plaintiff generated gross profits before expenses of $389,935. After expenses; however, the net income is $46,614.

[49] The plaintiff’s evidence is that it has unencumbered assets valued at approximately $72,000 USD; however, in that same statement, it is noteworthy that the two delivery vehicles (2006 and 2013 cargo vans) are encumbered by financing. The amounts financed for these vehicles are not provided. Therefore, I find that the stated value of the plaintiff’s assets of $72,000 USD is unreliable.

[50] Other assets include walk-in and display coolers, chocolate warmers, sinks, production tables, counters with countertops, desktop computers, cutter and peeler.

[51] The plaintiff’s evidence fails to set out the basis for the value of those assets, other than that it is information provided by Cynthia Rose, a director and officer of the plaintiff.

[52] The evidence of Fezan Khalil contains a bald statement that the value of the unencumbered assets does not include the value of the business generally. However, the evidence falls short of providing any value of the business whatsoever either in the form of a business valuation or an opinion from the company’s accountant.

[53] In considering whether the plaintiff has sufficient assets to pay a costs order, it is necessary to consider the defendant’s costs. The defendant’s bill of costs sets out its actual fees incurred from December 2012, when current counsel for the defendant was retained, to and including this motion. Estimated fees are set out for the plaintiff’s pending refusals motion, trial preparation, and a five-day trial. The fees, both actual and estimated, on a partial indemnity basis are $103,208. With disbursements and HST, the total is approximately $128,800.

[54] I find that the plaintiff’s evidence is significantly deficient for the following reasons. There is no basis for the stated value of the unencumbered assets listed in the form of supporting documents. Even if one were to accept that the value is $72,000 USD, that value is necessarily less given that the two vehicles listed are encumbered by an unknown amount. The plaintiff has failed to be forthright regarding the value of unencumbered assets. Further, there is no evidence of the plaintiff’s assets and liabilities, no evidence of the value of the business, and no bank statements. Moreover, there is no evidence as to whether Dr. Patrick Charles or Cynthia Rose, directors and officers of the plaintiff, are able to raise the money to satisfy a costs order. The plaintiff is a small private company (presumably the name “Charose” is made up of part of Dr. Charles’ and Ms. Rose’s names). It is reasonable to assume that they will benefit financially if this action succeeds. All of this information is within the plaintiff’s knowledge. Considering its onus, the plaintiff ought to have tendered this information. The fact is that the plaintiff is a small company which operates one retail franchise business. This fact is all the more reason why it was incumbent on the plaintiff to put forth adequate evidence as to the sufficiency of its assets. This is in contrast to the fact scenario in Greensteel Industries Ltd. v. Binks Manufacturing Co. of Canada Ltd. (1982), 1982 1799 (ON CA), 35 O.R. (2d) 45 (C.A.), cited in Smallwood at para. 9, where it was conceded by the applicant that the respondent was a large corporation with substantial assets.

[55] For the above reasons, I find that the plaintiff has failed to meet its onus of demonstrating that it has sufficient assets in Michigan to pay a costs order.

[56] Given this finding, it is unnecessary to address the issue of enforcing an Ontario judgment in Michigan.

Merits of the Action

[57] The defendant does not dispute the merits of the action.

Delay in Bringing Motion

[58] It is the plaintiff’s position that it would be unjust for the court to make a security for costs order given the defendant’s delay in bringing this motion for more than five years after the action was commenced.

[59] The defendant states that in addition to the plaintiff having no assets in Ontario, it brought this motion primarily because of the plaintiff’s repeated delays that have forced the defendant to incur far greater costs than normal. For example, the defendant cites the plaintiff’s recent declaration that it intended to bring a refusals motion after having set the matter down for trial and advising the court that no further motions were necessary. Further, the defendant is only seeking costs incurred since Osler, Hoskin & Harcourt LLP was retained in 2012.

[60] In 423322 Ontario Ltd. v. Bank of Montreal (1988), 1988 4678 (ON SC), 66 O.R. (2d) 123, Granger J. refused to order security for costs where the defendant’s delay was unexplained and the action was not frivolous or vexatious.

[61] Granger J. quoted Master Peppiatt’s review of the law in Ontario on security for costs and delay, citing from Charron v. MacDonald, 1938 352 (ON SC), [1938] O.W.N. 410 (Ont. H.C.), at para. 8, as follows:

There is however, a much more serious objection to this motion; namely, the delay in bring the application. Where a defendant believes that he is entitled to an order for security for costs, he should move at the earliest possible moment in order that the plaintiff may know whether or not he will be required to give security and to prevent him from proceeding at very considerable expenses down to trial and then find himself faced with an order for security for costs with which he is unable to comply.

By reason of the delay of the defendant MacDonald in making his application for security, the plaintiff had gone to the expense of bringing the action down to the eve of trial when she is faced with this application for security for costs. She should not be prevented at this late date from going to trial even if the material should be sufficient to warrant an order for security.

[62] In the recent decision in 1632097 Ontario Ltd. v. 1338025 Ontario Inc., 2011 ONSC 5909 at para. 16, Master Muir refused to order security for costs on the eve of trial. His following reasons are set out at para. 16:

Even accepting that the defendant has satisfied the onus of establishing that the plaintiff has insufficient assets to respond to a costs order, I have nevertheless determined that it is not just, in the circumstances of this action, to order the plaintiff to post security for costs. Ultimately, the role of the Court on a motion such as this is to make the Order that is just in the circumstances. See Shuter v. Toronto Dominion Bank, [2007] O.J. No. 3425 (S.C.J. Master) at paragraph 63. All of the evidence relied upon by the defendant in support of this relief was known to it many years ago. The defendant has provided no explanation as to why it waited so long to bring this motion and to now do so on the eve of trial. The plaintiff has expended time and money pursuing this action. It should not be faced with a security for costs motion after having done so when the basis for the requested security for costs was known to the defendant for many years. A defendant should be required to bring a motion for security for costs as soon as it becomes aware of the grounds for doing so. This is because it allows the plaintiff to make an informed decision about whether to invest time and money in litigation, knowing that it may have to post such security as a condition of proceeding to trial. In my view, the defendant’s delay in bringing this motion weighs heavily against the granting of security for costs. See 423322 Ontario Ltd. v. Bank of Montreal, 1988 4678 (ON SC), [1988] O.J. No. 1486 (H.C.J.) at paragraphs 15 and 18.

[63] In some decisions, the courts have held that delay alone is not sufficient to defeat the moving party and that prejudice must be demonstrated (Linshalm v. Haberler, [1997] O.J. No. 2842, cited in Livent Inc. (Receiver and Manager of) v. Deloitte & Touche, 2011 ONSC 648, 76 C.B.R. (5th) 172 at para. 48).

[64] The plaintiff herein submits that forcing it to pay security for costs would effectively end this proceeding as it has sufficient assets to respond to a costs order in Michigan, but does not have the liquidity to post security for costs. However, it was my earlier finding herein that the plaintiff failed to put forth adequate evidence to reach a finding that it had sufficient assets to pay a costs order. For those same reasons, there is insufficient evidence for this court to accept that an order for security for costs would force the plaintiff to end this proceeding.

[65] In Patrick Harrison & Co. v. Devran Petroleum Ltd. [1999] O.J. No. 3948, Justice Lamek, in weighing the factor of delay, ordered security for costs incurred after the bringing of the motion.

[66] Contrary to the facts in the above cited cases of 423322 Ontario Ltd. v. Bank of Montreal and 1632097 Ontario Ltd. v. 1338025 Ontario Inc., the motion herein was not brought on the eve of trial. However, since October 2008 when the action was commenced, most of the usual steps in a proceeding have been completed -- discoveries have been held, undertakings have been satisfied, mediation held, the action was set down for trial and the pre-trial conference was scheduled and adjourned several times because of the plaintiff’s delay. In my view, the plaintiff’s following actions led the defendant to believe that this proceeding would proceed to trial quickly. Examples are the plaintiff’s statement in its pre-trial conference memorandum that no motions were contemplated, setting the action down for trial on February 28, 2011, not having delivered any expert reports prior to the pre-trial conference, and not having brought a refusals motion despite the discovery of the defendant being held in December 2011. However, at the second scheduled pre-trial conference in August 2013, the plaintiff announced its intention to bring a refusals motion, and then three months later in October 2013, the plaintiff announced for the first time that it intended on delivering an expert damage report.

[67] It is common knowledge that there are consequences of setting an action down for trial under rule 48.04. In particular, the party who set the action down is prohibited from initiating any motion or form of discovery without leave of the court with certain enumerated exceptions in subrule (2). The parties consented to conducting discoveries after the action was set down. Regarding the plaintiff’s refusal motion, there is an issue as to whether the plaintiff requires leave to bring that motion as it is based on refusals and not undertakings.

[68] Further, it is also common knowledge that rule 53.03(1) requires that a party who intends to call an expert witness at trial is required under Rule 50 to serve the expert report at least 90 days before the pre-trial conference.

[69] The defendant gave notice of this motion at the pre-trial conference in August 2013 in response to the plaintiff advising of its intention to bring a refusals motion. That, in my view, does not justify the defendant waiting so long to bring this motion. Since it was served with the statement of claim in 2008, the defendant ought to have anticipated that discoveries would be held and that there may be discovery motions arising out of undertakings or refusals. These are normal steps in any proceeding.

[70] Further, the fact that the action was set down for trial by the plaintiff prematurely did not, in my view, delay this action as the parties agreed to conduct discoveries thereafter. In fact, by setting the action down for trial, a pre-trial conference was scheduled earlier than it would have been had the plaintiff waited to set it down until after discoveries were held. Although, it is recognized that there have been additional attendances at the pre-trial conference because the action was clearly not ready for a pre-trial conference. I agree that setting the action down for trial prematurely has caused some additional and unnecessary costs to the defendant (and the plaintiff).

[71] The fact that the plaintiff decided late in the action to obtain an expert damage report will, undoubtedly, delay this action further particularly because there now is an issue regarding that proposed expert’s impartiality. A motion may be required on that issue. However, given the claims and the facts as set out in the statement of claim, in my view, it would be expected that the plaintiff would deliver an expert damage report and that the defendant would likely respond to same. Therefore, the fact that the plaintiff is now, albeit very late, intending to deliver an expert report, is a step in the action that ought to have been anticipated by the defendant early in this action. Therefore, I do not accept that this late step in the action will cause the defendant greater costs than normal.

[72] The defendant has known about the plaintiff’s circumstances since, at the earliest, when this action was commenced in late 2008, and likely since 2005 when the parties commenced their business relationship in Michigan. For the above reasons, the late steps taken by the plaintiff do not, in my view, explain the delay in the defendant bringing this motion. The plaintiff should not be faced with a security for costs motion after having expended time and money pursuing this action when the basis for the motion was known, or ought to have been known to the defendant for many years. The defendant has its remedy available should the plaintiff not succeed on its refusals motion by seeking costs and a short term for payment. The same applies to any motion that may be brought regarding the plaintiff’s proposed damage expert.

[73] In the circumstances given my finding that the plaintiff failed to demonstrate that it has sufficient assets as alleged to pay a costs order, and the fact that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs, this is an appropriate case to order that the plaintiff pay security for costs incurred after this motion.

[74] The material suggests that the trial may last up to five days. There will also be the costs to attend the pre-trial conference. The trial will be scheduled at the conclusion of the pre-trial conference, which has not been scheduled given the plaintiff’s pending refusals motion and delivery of all expert reports. The trial will likely be at least a year from now.

[75] The plaintiff shall pay into court for security for costs the total amount of $35,000. The plaintiff shall pay $10,000 within 90 days of the date this decision is released, a further $10,000 within 90 days after the first payment, and the balance of $15,000 shall be paid within a further 90 days after the second payment.

Costs

[76] The defendant has been successful in part on this motion. The plaintiff shall pay the costs of the motion on a partial indemnity basis of $2,500 within 60 days.

Original signed “Lou Ann M. Pope”

Master Lou Ann M. Pope

Date: July 17, 2014