CITATION: 1700285 Ontario Inc. v. Vass, 2016 ONSC 1322
COURT FILE NO.: 3810-15-CL
DATE: 2016/03/03
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1700285 ONTARIO INC.
o/a THE GENERAL
David Ricard, for the Plaintiff
Plaintiff
- and -
DR. STEPHEN VASS
Dhiren R. Chohan, for the Defendant
Defendant
HEARD: February 10, 2016
ellies j.
CORRECTED REASONS FOR DECISION
[1] There are two motions before the court. In the first, the plaintiff, 1700285 Ontario Inc. o/a The General (“170”), seeks leave under subrule 15.01(2) of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194, to be represented by its sole shareholder, David Ricard (“Ricard”), rather than by a lawyer. In the second, the defendant, Stephen Vass (“Vass”), seeks an order under subrule 56.01(1) for security for costs. Both motions arise in the context of an action by 170 under the Construction Lien Act, R.S.O. 1990, c. C.30, in which it alleges that Vass owes it nearly $70,000 relating to the construction of a double-car garage with a loft.
[2] For the following reasons, both motions are granted.
THE LEAVE MOTION
[3] Subrule 15.01(2) requires that a corporation be represented by a lawyer, except with leave of the court. A review of recent cases decided under this rule reveals that the following factors ought to be taken into account, among others, in a motion for leave under this rule:
(a) whether the person seeking to represent the corporation is a senior representative of the corporation and has been duly authorized to represent the corporation by a duly elected board of directors: see 149212 Ontario Ltd. v. Astrochrome Crankshaft Toronto Ltd. (1991), 1991 CanLII 7163 (ON SC), 3 O.R. (3d) 116 (Ont. S.C., Master), para. 13;
(b) whether it would be seriously unfair to the opposing party to have the case presented or defended by a non-lawyer, in light of the nature of the action: Astrochrome, ibid.;
(c) whether the proposed corporate representative will be able to properly carry out the duties of a litigant under the Rules: Astrochrome, ibid.; and
(d) whether the corporation is financially unable to retain counsel: Extend-A-Call Inc. v. Granovski, 2009 CanLII 33047 (ON SC), [2009] O.J. No. 2711, at para. 19; J. C. Nature Source Health Centre Inc. v. ISO Renovation Design, 2013 ONSC 4966, at para. 13.
[4] In this case, none of the first three factors are at issue. As mentioned, Ricard is the sole shareholder of 170. Although 170 has not introduced any evidence of a formal corporate resolution authorizing Ricard to represent the company, there is no doubt that he has the corporation’s authority to act.
[5] With respect to the second factor, Vass has taken no position regarding the plaintiff’s request.
[6] Regarding the third factor, namely Ricard’s ability to carry out the duties of a litigant, there is no evidence that he is unable to do so and no argument has been made to that effect.
[7] However, the final factor, namely the financial ability of the corporation to afford counsel, is an issue. No evidence has been introduced on behalf of 170 with respect to the financial circumstances of the corporation. I have no evidence from the corporation that it cannot afford to retain counsel.
[8] Nonetheless, I do not believe the lack of evidence from 170 on this issue sought to preclude it from obtaining the relief it requests. I say this for three reasons.
[9] Firstly, the other factors weigh sufficiently in favour of granting the order.
[10] Secondly, the trend in the jurisprudence under this rule favors granting leave to corporations that are, in essence, sole proprietorships, as this one appears to be: Lamond v. Smith, 2004 CanLII 6218 (Ont. S.C.); Blauth v. Webster, 2014 ONSC 5457; Waisberg v. Inwood, 2014 ONSC 2282.
[11] Thirdly, although it does not come from 170, there is evidence that 170 may not be able to afford to retain counsel. That leads me to a discussion of the motion brought by Vass.
THE MOTION FOR SECURITY FOR COSTS
[12] Under clauses (d) and (e) of subrule 56.01(1) of the Rules of Civil Procedure, a plaintiff may be ordered to provide security for costs where there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant and either (1) the plaintiff is a corporation or nominal plaintiff; or (2) there is good reason to believe that the action is frivolous and vexatious.
[13] Vass’s notice of motion refers to both grounds in support of his request for an order that the plaintiff post security for costs. However, no argument was made either during the hearing of the motion or in the factum filed on behalf of Vass that the action is frivolous and vexatious. Instead, the focus of the motion has been on the first ground, set out in rule 56.01(1)(d), that the plaintiff is a corporation or nominal plaintiff and that there is good reason to believe it has insufficient assets in Ontario to pay the defendant’s costs. Vass deposes that he had no knowledge that he was dealing with a corporation rather than with Ricard personally. In addition to Vass’s evidence, counsel for Vass relies on the following evidence:
(1) that all of Vass’s dealings were with Ricard and not with the corporation;
(2) that, at different times, Ricard requested that cheques be made payable to him personally, to “The General”, and, on one occasion, to Ricard’s mother;
(3) that searches have revealed that there is no real property in the City of Sudbury owned either by Ricard or by the corporation;
(4) that the registration of another corporation in which Ricard was a director, with a name similar to that used by 170, was cancelled because of non-payment of corporate taxes;
(5) that there is at least one sub-contractor on the Vass renovations who remains unpaid; and
(6) that it appears the corporation cannot afford to retain counsel, given its request that Ricard be permitted to act on behalf of the corporation.
[14] A defendant moving under rule 56.01(d) need not prove to the civil standard that a plaintiff has insufficient assets in Ontario. Instead, the defendant need only establish “good reason” to believe that this is true: Warren Industrial Feldspar Co. v. Union Carbide Canada Ltd. (1986), 1986 CanLII 2683 (ON SC), 54 O.R. (2d) 213 (Ont. H.C.), [1986] O.J. No. 2364, at para. 23.
[15] Despite the reduced burden on the defendant, I find much of the evidence referred to above to be incapable of meeting this lower threshold.
[16] I am not persuaded that the fact that Vass dealt exclusively with Ricard is a reason, alone or in combination with the other evidence, to make the order requested. There is nothing abnormal about the fact that a corporation has a single “frontman”. This fact says nothing about the corporation’s assets.
[17] More importantly, I do not accept Vass’s evidence that he had no knowledge that he was dealing with a corporation. I am unable to accept that evidence for these reasons:
(a) On November 21, 2013, Vass signed a document entitled “Bid Proposal”. Above the signature line set out for him on that document there was a signature line set out for:
Dave Ricard
President
The General 1700285 Ontario Inc.
Contractor
(b) Although he denies it, I find that Vass received at least one invoice on which the words “The General 1700285 Ontario Inc.” appear, and on which Vass was asked to make cheques payable to that entity. I reach this conclusion because 170 has introduced an e-mail dated March 27, 2014 from Ricard that I believe had to have been received by Vass and to which was attached an invoice of this type (“Invoice 14-105.pdf”). The e-mail indicates that it was sent to two e-mail addresses, namely “svassdental@vianet.ca” and “smvdds@vianet.ca”. There is uncontroverted evidence that Vass received messages at both of these addresses. For example, Vass does not deny that he received a document called “Payment Schedule”, which was attached to an e-mail sent to the “svassdental@vianet” address. As another example, Vass attaches to his own affidavit of May 11, 2015 a copy of an e-mail he sent to Ricard from “smvdds@vianet.ca”.
[18] I am also not persuaded by the evidence that Jackson Electric was unpaid. As counsel for Vass concedes, there is a dispute between the parties as to who was responsible for payment of this sub-contractor. As a result, nothing can be inferred about the corporation’s financial status from the fact that this sub-contractor was unpaid.
[19] Finally, I do not believe that the fact that 170 seeks leave to have Ricard represent it should be given much weight. The amount at stake in this litigation is only $69,045.86, without interest or costs. Even a corporation with sufficient assets might think twice about retaining a lawyer to pursue that relatively small sum. As well, there is evidence that 170 did retain counsel to advise it and to file the construction lien underlying the plaintiff’s action.
[20] The remaining evidence, however, does provide good reason to believe that 170 does not have sufficient assets in Ontario to pay the defendant’s costs. In this regard, the financial resources of both the corporation and the sole shareholder are relevant: D. M. Urban-Skate Property Developments Ltd. (c.o.b. Sheffield Contracting) v. Body Blitz Spa East Inc., 2014 ONSC 1616 (Master) at para. 10.
[21] While the search for property owned by either Ricard or the corporation was limited to the City of Sudbury, the search is relevant because the address given for the corporation on the various documents to which I have referred above indicates that the corporation was based in Sudbury.
[22] Also telling is the fact that an earlier corporate entity concerning which Ricard was a director was dissolved for non-payment of taxes. Vass has introduced a Certificate of Status and other documents from the Ministry of Government Services showing that Ricard was one of two directors of a corporation that used the name “The General Construction and Renovation Co. Ltd.”. The documents indicate that the corporation came into existence on February 1, 2005 and was dissolved on October 24, 2011 for failing to pay corporate tax. Similar evidence was introduced in support of a motion for security for costs in RCVM Enterprises Ltd. v. International Harvestor Canada Ltd. (1985), 1985 CanLII 2098 (ON SC), 50 O.R. (2d) 508 (Ont. S.C.), in which Master Clark held that the evidence established good reason to believe that the plaintiff had insufficient assets in Ontario.
[23] Equally troubling is the fact that Ricard requested that Vass make a cheque in the amount of $30,000 payable to Ricard’s mother. This is highly unusual and has not been explained by 170. Several inferences are possible. Perhaps the most favourable inference is that Ricard owed his mother money. Another is that Ricard was trying to keep the money from being accessed by creditors. Neither possibility is helpful to 170.
[24] Where a defendant has established good reason to believe that a plaintiff has insufficient assets in Ontario to pay the defendant’s costs, a plaintiff has two avenues open to it to avoid an order that it post security. It may either (1) lead evidence to show that it has sufficient assets in Ontario, or (2) it may lead evidence to show that, indeed, it is impecunious and that being required to post security will preclude it from proceeding with a meritorious claim: Warren Equipment, at para. 25, referring to RCVM Enterprises.
[25] The plaintiff in this case has done neither of these things. It has remained completely silent on the issue of its assets. Instead, 170 argues that it has a good case and should be allowed to proceed. As the court held in Warren Equipment, however, the merits of the case are only relevant when the plaintiff is relying on its own impecuniosity to avoid an order that it post security for costs. The plaintiff in this case has adduced no evidence regarding its assets. Therefore, it is not in a position to argue that an order requiring it to post security for costs will preclude it from proceeding.
[26] For these reasons, the plaintiff shall be required to post security for costs.
[27] In his notice of motion, Vass sought security for costs in the amount of $55,500. This amount was based on the premise that Mr. Huneault would have carriage of this matter. Mr. Huneault has 22 years of experience. However, Mr. Chohan advises that he now has carriage of this matter. His experience level is much less than that of Mr. Huneault. For that reason, Mr. Chohan asks for security for costs in half of the amount originally requested, namely $27,250.
[28] 170 argues that the costs should be better broken down. I disagree. The costs sought are broken down sufficiently for the purposes of the motion. However, I believe that the amounts sought with respect to the items listed in the breakdown are somewhat excessive. The estimate contemplates examinations for discovery taking two days, the costs of documentary production being in excess of $5,000, the cost of transcripts being $3,000, and five days of court time being required for trial. I realize that it is impossible to estimate these things with any degree of precision. Nevertheless, my experience leads me to believe that the length of time and the disbursements involved in pre-trial discovery, as well as the length of time required for trial, will be less than that estimated. For that reason, I believe that the amount that the plaintiff should be required to post as security should be less. The plaintiff shall be required to post security for costs in the amount of $20,000. This may be posted either by paying that sum into court or by way of a bond of guarantee pursuant to s. 115 of the Courts of Justice Act, R.S.O. 1990, c. C.43. In either case, security shall be posted within 30 days of the release of these reasons.
COSTS
[29] While each party was successful on its motion, only Vass’s motion was opposed. For that reason, I believe that he ought to be paid costs.
[30] On behalf of the defendant, Mr. Chohan seeks partial indemnity costs in the amount of $5,387.15, inclusive of HST. Like the amount sought by way of security for costs, I believe that this is somewhat excessive.
[31] The Bill of Costs submitted in support of Mr. Chohan’s request shows that, by far, the bulk of the work to prepare for the motion was done by Mr. Huneault. Mr. Huneault bills at twice the rate of Mr. Chohan. According to the Bill of Costs, Mr. Huneault spent over 16 hours preparing for the motion, as opposed to Mr. Chohan’s six hours, excluding Mr. Chohan’s appearance as counsel. Having more senior counsel prepare for matters upon which more junior counsel appears is contrary to the usual practice. The usual practice is the opposite. There are at least two good reasons for this. First, the junior lawyer gets invaluable experience by watching senior counsel in a case with which the junior lawyer is intimately familiar. Second, and more important from the client’s perspective and that of the losing party, having junior counsel do the bulk of the preparatory work saves money. While the client has a choice and may instruct counsel to proceed in the way counsel has proceeded in this case, the losing party does not. I do not believe that the losing party should be saddled with costs that can be, and usually are, avoided.
[32] For these reasons, the defendant will be awarded his partial indemnity costs in the amount of $3,500, inclusive of HST.
ORDER
[33] An order shall issue:
(a) that leave shall be granted under rule 15.01(2) to permit the plaintiff to be represented by David Ricard;
(b) that the plaintiff shall post as security for costs the sum of $20,000.00, by payment of that sum into court or by bond of guarantee, within 30 days of the release of these reasons; and
(c) that the plaintiff shall pay to the defendant his costs of the motion in the amount of $3,500.00, inclusive of HST.
Ellies J.
Released: March 3, 2016
CORRIGENDUM
Corrections made on March 3, 2016: (the change is italicized):
Date heard on page 1 was amended to read: HEARD: February 10, 2016.
Paragraph 13 (3) and (4) were amended to read : (3) that searches have revealed that there is no real property in the City of Sudbury owned either by Ricard or by the corporation; or (4) that the registration of another corporation(,) in which Ricard was a director, with a name similar to that used by 170, was cancelled because of non-payment of corporate taxes;
Paragraph 17 (b) was amended to read : Although he denies it, I find that Vass received at least one invoice on which the words “The General 1700285 Ontario Inc.” appear, and on which Vass was asked to make cheques payable to that entity. I reach this conclusion because 170 has introduced an e-mail dated March 27, 2014 from Ricard that I believe had to have been received by Vass and to which was attached an invoice of this type (“Invoice 14-105.pdf”). The e-mail indicates that it was sent to two e-mail addresses, namely “svassdental@vianet.ca” and “smvdds@vianet.ca”. There is uncontroverted evidence that Vass received messages at both of these addresses. For example, Vass does not deny that he received a document called “Payment Schedule”, which was attached to an e-mail sent to the “svassdental@vianet” address. As another example, Vass attaches to his own affidavit of May 11, 2015 a copy of an e-mail he sent to Ricard from “smvdds@vianet.ca”.
CITATION: 1700285 Ontario Inc. v. Vass, 2016 ONSC 1322
COURT FILE NO.: 3810-15-CL
DATE: 2016/03/03
ONTARIO
SUPERIOR COURT OF JUSTICE
1700285 ONTARIO INC. o/a THE GENERAL
Plaintiff
– and –
DR. STEPHEN VASS
Defendant
corrected REASONS FOR DECISION
Ellies J.
Released: March 3, 2016