COURT FILE NO.: 12-55897

DATE: September 15, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DONALD JOSEPH MURRAY, Plaintiff

AND:

LEE ERRETT, et. al., Defendants

BEFORE: MASTER MACLEOD

COUNSEL: Nicholas C. Tibollo, for the Defendants, moving parties

Michael S. Hebert, for the Plaintiff, responding party

HEARD: August 20th, 2015

ENDORSEMENT

[1] This is a motion for security for costs. I am faced with competing narratives.

[2] In the defendants’ narrative the plaintiff is a dishonest devious undischarged bankrupt who has avoided paying his debts for most of his life, who violated their trust and stole from them and who now brings a spurious and unjustified legal action.

[3] The plaintiff has a different story. He paints a picture of a man that has done his best to support himself, grow a business and help the defendants despite his crippled legal status and ongoing persecution by the Canada Revenue Agency. In his narrative the defendants have been enriched by his efforts to the tune of millions of dollars. Relying upon his age and legal vulnerability they have reneged on a promise to compensate him. They now seek to defeat his claim by a series of unjust and abusive motions. Security for costs he says would be unreasonable.

[4] This is not the time to resolve these competing stories nor to delve deeply into the evidence to see if one is more believable than the other.

[5] On a motion for security for costs, the court is faced with the case as pleaded and not as it might be reframed. The evidence before the court is for the limited purpose of deciding whether the threshold requirements of the rule are engaged and if so whether or not it would be just to order security under the circumstances. While this may include evidence directed to whether or not the action has merit, it is not an in depth review such as that which would engage the court on a summary judgment motion.

[6] The merits are engaged on this motion in two ways. Firstly the merits must be assessed because this is a motion under Rule 56.01 (e) and secondly they are engaged because the plaintiff argues that he is “impecunious” so that an order for security for costs would be unjust.

[7] There are certainly problems with this case. Notwithstanding the attempt to cast the claim as one which a bankrupt person may bring, the original demand letters were for a share of the value of the business. In the claim, the plaintiff is seeking over $1.25 million in compensation for “unpaid wages”, $100,000 for loss of “benefits” and “$500,000.00 for breach of contract and wrongful dismissal”. In the alternative he seeks $1.25 million compensation of a quantum merit basis.

[8] The plaintiff states that he worked in his wife’s business prior to her death and subsequently worked for the defendant Errett and the defendant corporations as Chief Executive Officer but he was not paid a salary. Instead he was to be compensated by being provided with a company house, a company car, a company credit card and ultimately was to receive compensation on the sale of the business.

[9] On cross examination the plaintiff appears to have admitted that he was not an “employee” as such and he apparently reiterated that he was promised 50% of the value of the business when it will ultimately be sold by Dr. Errett.

[10] The plaintiff is an undischarged bankrupt. This stems from an order made in 1971 in which the late Justice Houlden refused a discharge, stated that the plaintiff was a “menace to the business community” and in an extraordinary decision found that “I believe you should never be granted a discharge but should remain a bankrupt for the rest of your life”.

[11] The subsequent history is murky. It appears the plaintiff did go through another bankruptcy in 1998 notwithstanding the earlier bankruptcy. It also appears that his debts in 1998 were almost a million dollars although Mr. Hebert argues that the bulk of that was tax debt dating from the first bankruptcy. In any event the 1998 bankruptcy should properly speaking have been annulled but it appears the file is still open. None of this was adequately explained.

[12] Notwithstanding these impediments, it is undisputed that the plaintiff ran the furniture business owned by his late wife and known as the Old Oak Tree. According to his pleading he did so both before and after her death. In 2007 the business was sold by the estate to the defendant, Lee Errett, who is a full time physician working in Toronto. The business has continued to operate since then and from 2007 to 2012 the plaintiff was the Chief Executive Officer. He also says he was a director of the various corporations notwithstanding his legal status.

[13] There are various problems with the action as pleaded. If it is truly a claim for wages then elements of it may be statute barred. On the other hand (though both parties denied that this was so) if the nature of the contract was to assist the defendant to avoid his creditors and to get around legislative restrictions, it may have been an illegal and unenforceable contract. Fundamentally however if the plaintiff is correct that his efforts assisted the defendant to build up an asset that is worth millions of dollars and if as he says he was inadequately compensated for his time and effort and then summarily dismissed without cause, it is hard to categorize the action as merely frivolous and vexatious. At least a portion of the action would appear to raise a genuine and triable issue.

[14] There is no doubt that as an undischarged bankrupt the plaintiff has insufficient assets to satisfy a judgment for costs but that is not enough under Rule 56.01 (e). In the case of an individual resident of Ontario, the court must be persuaded there is good reason to believe that the action is “frivolous and vexatious” and that the plaintiff has insufficient assets to satisfy an award of costs.

[15] Assuming the threshold test is met, the court must then consider whether or not it is just to make an order for security for costs. At the hearing of the motion, the plaintiff attempted to rely on “impecuniosity” to show that it would be unjust to order security. He did not meet that test because he failed to make the detailed financial disclosure that would be necessary including disclosure of the current financial status of his wife and a full explanation of how he has managed to apparently operate companies and acquire additional debt while remaining in bankruptcy for more than 40 years.

[16] I acknowledge that the defendant claims he knew nothing of the plaintiff’s status as an undischarged bankrupt. He claims he was misled but he acknowledges that during the entire time the plaintiff worked in the business he was offered but refused a salary. If he was made the Chief Executive Officer and permitted to play a major role in the business but was paid no compensation other than the use of a house and a car and if he was then summarily terminated, it is difficult to see how there would not be some substance to the claim for compensation whatever its difficulties might be.

[17] In the final analysis, I am not persuaded that there is good reason to believe the claim is frivolous. To the contrary it appears to me it may be a claim with some merit. I decline to award security for costs.

[18] I am not prepared to award costs of the motion. The adjournment was for the specific purpose of putting in evidence of impecuniosity. The evidence that was tendered was inadequate for that purpose. Moreover, given the murky bankruptcy history, the plaintiff has not made the complete full and frank disclosure he ought to have done. In fact I am directing that the Superintendent of Bankruptcy be put on notice in this matter so that he may consider whether or not this matter should be investigated or whether the Office of the Superintendent should seek leave to intervene in the action.

[19] In summary, there will be no order for security. There will be no costs of the motion. A copy of these reasons will be forwarded to the Superintendent of Bankruptcy.

Master MacLeod