2015 ONSC 2152
COURT FILE NO.: CV-12-453974
MOTION HEARD: APRIL 2, 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: City Star Roofing Inc.
v.
Bondfield Construction Company Limited
BEFORE: MASTER R.A. MUIR
COUNSEL: Christine Kellowan for the defendant, moving party Amarjit Singh, non-lawyer, for the plaintiff, responding party[^1]
REASONS FOR DECISION
[1] The defendant brings 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 defendant takes 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 defendant.
[2] The plaintiff is opposed to the relief sought by the defendant.
[3] This is an action seeking payment of outstanding invoices for construction services allegedly provided to the defendant by the plaintiff. The plaintiff seeks payment of approximately $340,000.00. The defendant has delivered a statement of defence and counterclaim. The defendant alleges that the plaintiff did not perform all of the work as claimed and that such work that was performed was incomplete, deficient and otherwise failed to comply with project specifications. The defendant's counterclaim seeks $200,000.00 in damages.
[4] 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 . . .
[5] The principles applicable to a motion of this nature can be found in my decision in Sadat v. Westmore Plaza Inc., 2013 ONSC 469 (Master); affirmed 2013 ONSC 3237 (SCJ) . In general terms, the moving defendant has 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 defendant 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 defendant. The onus then shifts to the plaintiff to tender evidence that it has assets available to respond to any costs order, to demonstrate impecuniosity or to ask the court to make such order as is just in the circumstances. See Sadat at paragraphs 20 and 21.
[6] I have applied those factors and principles in determining the issues on this motion. Overall, I am guided by the central principle that an order for security for costs is discretionary. The role of the court on a motion such as this is to make the order that is just in all of the circumstances. See Sadat at paragraph 22.
[7] In my view, the defendant has failed to meet the first part of the test. I appreciate that the burden on the defendant is not a heavy one but it is a burden nevertheless.
[8] The plaintiff's evidence filed on the motion before Master Glustein must be read in context. When Mr. Singh states at paragraph 9 of that affidavit that the plaintiff has no assets he appears to be referring to fixed assets in the nature of equipment, inventory or other capital assets. This is made clear by his statement that immediately follows that the plaintiff typically rented equipment and purchased materials on a project by project basis.
[9] The plaintiff is a small trade contractor. It is a one person operation. It is hardly surprising to learn that the plaintiff has few, if any, fixed assets and does not carry a significant balance in its bank account. Equipment is rented, workers are hired as needed and materials are purchased when necessary.
[10] The principal assets of a business such as that operated by the plaintiff will be its pending contracts, work in progress and accounts receivable. The plaintiff's evidence is that it continues to operate and has ongoing contracts for the supply of services and materials. It is more active now than it has been over the last several years and expects that its business will continue to grow. There is no evidence to the contrary. Its income tax return sets out revenue in 2012 of $73,000.00 and $56,000.00 in 2013.
[11] From all of this evidence it is reasonable to infer that the plaintiff is possessed of at least some assets in the form of contracts, work underway and accounts receivable. I note that the plaintiff's evidence is that its assets are unencumbered. There is no evidence to suggest that the plaintiff has defaulted in its obligations to workers, suppliers or other creditors.
[12] Finally, the defendant seeks security for costs in the amount of approximately $34,000.00. However, a significant portion of that amount must be viewed as costs to be incurred to advance its counterclaim. A party cannot be required to post security for costs in order to defend itself. The defendant estimates that 50% of its projected costs fall into that category, leaving approximately $17,000.00 as its costs estimate for defending the action. When this factor is taken into account, the potential costs to the defendant in defending this action are quite modest.
[13] For all of these reasons, I see no basis for concluding that there is good reason to believe that plaintiff's assets are insufficient to meet such a modest potential costs liability.
[14] I have therefore concluded that the defendant has not met its initial onus on this motion. The defendant's motion is dismissed.
[15] In terms of costs, the plaintiff has no evidence of lost opportunities as a result of devoting time to respond to this motion. However, the plaintiff advised the court that he has paid a legal professional approximately $1,200.00 to assist him in responding to this motion. In my view, this amount is fair and reasonable for a motion of this nature. The defendant shall pay the plaintiff's costs of this motion in the amount of $1,200.00. These costs shall be paid by May 4, 2015.
[16] The plaintiff's written interrogatories shall be answered by John Aquino, on behalf of the defendant, within 90 days.
Master R.A. Muir
DATE: April 2, 2015
[^1]: Mr. Singh was granted leave to represent the corporation pursuant to the order of Master Glustein of August 27, 2014.