Court File and Parties
Brockville Court File No.: 15-0049 Date: 2016-04-21 Superior Court of Justice - Ontario
Re: THOMAS FULLER CONSTRUCTION CO. LIMITED, Plaintiff And: DANIEL L. BISSON o/a GRIMES ROOFING, 2351295 ONTARIO INC. and 2242869 ONTARIO INC. , Defendants And: DALE DREVNIOK and DALCON ENTERPRISES INC., Third Parties
Before: Mr. Justice Timothy Minnema
Counsel: Nadia J. Authier, for the Third Parties (Moving Parties) Joseph W.L. Griffiths, for the defendant Daniel L. Bisson (Responding Party)
Heard: April 6, 2016
Endorsement
MINNEMA, J.
[1] This is a motion by the third parties Dale Drevniok and Dalcon Enterprises Inc. for an order requiring the defendant Daniel L. Bisson to post security for costs of the within action. They seek three installments of $8,000 each.
Law
[2] The motion is pursuant to Rule 56 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It is conceded that the third parties have met their initial onus of establishing that the defendant falls within one of the enumerated categories in Rule 56(1), namely 56(1)(a), such that the court has the discretion to grant or refuse an order for security. It is further conceded that I am to make my decision taking into account a number of factors, with the onus on the defendant as the responding party to establish that an order for security would be unjust: Coastline Corp. v. Canaccord Capital Corp., 2009 CarswellOnt 2312 (Master Glustein) at para. 7(i), (ii), and (iii).
Issues
[3] The defendant listed three factors in his factum which he says militates against an order for security. One was delay, but that was not pursued in argument. In any event, with no allegation of prejudice and given that this action is still at the pleading stage, that is not a supported ground.
[4] The defendant alleged as a factor that the third parties in seeking security are sheltering behind their own actions that brought about his financial distress in the first place. I will touch on that briefly at the end of my decision.
[5] The defendant has not taken steps to establish that he is impecunious. He has not refuted the assertion by the moving parties that he has insufficient assets in Ontario to satisfy a costs award against him. As such, the third factor listed by the defendant, which both parties concede is the legal test and the issue for me to decide, is whether the defendant has established that he has a good chance of success on his third party claim: Uribe v. Sanchez, 2006 CarswellOnt 3553, [2006] O.J. No. 2370, 33 C.P.C. (6th) 94, at para. 6; Coastline Corp. v. Canaccord Capital Corp, at para. 7(iv)(c).
Good Chance of Success
[6] I am to look at the pleadings and the affidavit evidence filed on this motion to assess the merits of the defendant’s case: Coastline Corp. v. Canaccord Capital Corp, at para. 7(vi). There was no cross-examination on the affidavits by either party.
The Pleadings
[7] The plaintiff Thomas Fuller Construction Co. Limited was the general contractor on a condominium construction project in the City of Brockville. The Amended Statement of Claim essentially alleges that the plaintiff entered into a subcontract with one or more of the defendants in January of 2012 to perform the roofing work on the project that they failed or refused to complete in late 2013. The plaintiff has pled as alternative relief that it entered into the subcontract with 2242869 Ontario Inc. carrying on business as Grimes Roofing. The defendant Mr. Bisson is the sole shareholder of 2242869 Ontario Inc.
[8] The defendants deny all claims. Specifically Mr. Bisson denies any personal liability, indicating that the subcontract was with 2242869 Ontario Inc. The defence goes on to set out that if any of the defendants are found liable, then their failure or refusal to complete the subcontract was caused by Mr. Drevniok and/or his company Dalcon Enterprises Inc. in that Mr. Drevniok was the controlling mind and directing force of 2242869 Ontario Inc. The defence further pleads that Mr. Drevniok stood in the position of a fiduciary to 2242869 Ontario Inc. and his actions and conduct amounted to a breach of that duty making him personally accountable to the plaintiff for his misconduct and breaches of trust.
[9] The defendant Mr. Bisson commenced the third party claim against Mr. Drevniok and his company Dalcon Enterprises Inc. for contribution and indemnity of any amounts he is required to pay the plaintiffs. In keeping with the statement of defence, he has claimed that any alleged failure or refusal vis-à-vis the plaintiff was caused by Mr. Drevniok and his company Dalcon Enterprises Inc. as (1) they had control of 2242869 Ontario Inc. and were responsible for the negotiation, execution and management of the alleged subcontract with the plaintiff, and (2) they depleted and/or diverted tools, equipment, monies, resources and other assets belonging to 2242869 Ontario Inc. that were critical to it being able to do the work required on the project. He makes the same fiduciary duty and trust claims against Mr. Drevniok as in the defence to the main action.
[10] The third parties deny all of this in their Statement of Defence, although in somewhat couched terms. For example they denied that they had “complete dominion or control” (my emphasis) over 2242869 Ontario Inc., leaving open the possibility that they had a level of control. They denied that they “improperly diverted funds for the purpose of defeating or hindering the ability of 224 and/or Bisson to honour their obligations” (again my emphasis) leaving open the possibility that funds were diverted that contributed to the breach claimed by the plaintiffs. As will be seen below, a more complete denial is contained in Mr. Drevniok’s affidavit in support of this motion.
Affidavits
[11] Mr. Drevniok says in his affidavit that he incorporated 2242869 Ontario Inc. on May 5, 2010, sold his interest to Mr. Bisson on September 11, 2011, and thereafter “no longer performed any role negotiating, executing, operating or managing any of the construction contracts 224 entered into. Nor was I the controlling mind of 224.” He characterized this in his Factum and argument even more unequivocally, for example by stating in his Factum “At the time that Mr. Bisson’s business ran into difficulty, Mr. Drevniok had no role in the operation of the business.”
[12] On the affidavit evidence before me, I am incredulous of Mr. Drevniok’s suggestion that he had “no role” in the operation of 2242869 Ontario Inc.
[13] Almost all the dealings of 2242869 Ontario Inc. were done through an administrative assistant Ms. Dawna Wilson. She maintained the books and records of 2242869 Ontario Inc., and was involved in communications on behalf of the company in evidence. However, she was not even an employee of 2242869 Ontario Inc. She did not answer to Mr. Bisson. To the contrary, she was Mr. Drevniok’s administrative assistant. She was an employee of Mr. Drevniok’s company, the third party Dalcon Enterprises.
[14] The corporate office of 2242669 Ontario Inc. continues to be 5630 Doncaster Road. That is also the office for a number of Mr. Drevniok’s corporations including the third party Dalcon. There is no denial from Mr. Drevniok that all of the payroll records, tax records and supply records for 2242869 Ontario Inc. are held at that corporate office. Despite Mr. Drevniok alleging the sale of 2242869 Ontario Inc. to Mr. Bisson on September 6, 2011, he does not dispute that he prepared the financial records for 2242869 Ontario Inc. until 2013.
[15] Mr. Bisson swears that in late 2013 construction supplies (siding) were purchased by Mr. Drevniok for 2242869 Ontario Inc. using his own credit card. Again, this is not challenged.
[16] Mr. Drevniok remained on 2242869 Ontario Inc.’s bank account and signed numerous cheques on it, some as late as August of 2013. An email from the bank’s Commercial Account Manager indicates that Mr. Drevniok was taken off the account not in 2011 but in August 2013. That occurred at the request of Mr. Drevniok’s administrative assistant Ms. Wilson, who the bank manager believed was the “office manager/assistant” of 2242669 Ontario Inc.
[17] Both parties referred to cheques from 2242869 Ontario Inc. paid to two of Mr. Drevniok’s companies from 2011 to 2013. Mr. Drevniok asserted that the payments totalled $1,373,601.48. According to Mr. Bisson, they totalled $1,624,984.61. Mr. Bisson added that further payments of $573,860.39 were also made from 2242869 Ontario Inc. to other companies controlled by Mr. Drevniok, as well as to Mr. Drevniok personally, his wife, and his lawyers, making the grand total $2,198,845. It is important to note that many of the cheques to the various payees were signed by Mr. Drevniok himself. Mr. Drevniok maintains that the monies from 2242869 Ontario Inc. to him and his companies were to repay loans of $2,142,586.64. Mr. Bisson is skeptical and says that he cannot verify these “loans” (the quotation marks are his) as Mr. Drevniok remains in possession of all the records. There was no loan agreement in evidence, and no terms referred to. The evidence shows numerous transactions with funds in varying amounts going from Mr. Drevniok and his companies to 2242869 Ontario Inc., and then back to Mr. Drevniok and those same companies although in different proportions, and as noted some also to his wife and law firm.
[18] Mr. Drevniok knew 2242869 Ontario Inc.’s overall financial status, stating in an email exchange with Mr. Bisson around the time that the plaintiff gave notice of default that “there is nothing to recover” if the plaintiff goes after 2242869 Ontario Inc. Mr. Bisson alleges that Mr. Drevniok was “bleeding 224’s bank account dry” and that a full accounting of the records will make it “apparent that [Mr. Drevniok] stole money from 224 to line his own pockets.” These are strong accusations, and I want to make it clear that I make no such findings. However, whatever the dealings and arrangements between Mr. Bisson and Mr. Drevniok, on the evidence before me Mr. Drevniok was treating 2242869 Ontario Inc. as his own company.
Analysis
[19] Given the trust claim and the third party claim for contribution and indemnity in the event the plaintiff succeeds at trial, and in light of the legal test as set out above, the parties further narrowed the issue on this motion to be whether Mr. Bisson has a good chance of success in establishing that Mr. Drevniok was the controlling mind of 2242869 Ontario Inc. I find that he does. As such, in my view it would be unjust to require Mr. Bisson to post security. The injustice is more manifest as the impoverishment of the defendant from whom security is sought may have been caused in part by the very same parties who are seeking it: John Wink Ltd. v. Sico Inc. (1987), 57 O.R. (2d) 705 (H.C.J.) at pp. 708-709 and 423322 Ontario Ltd v. Bank of Montreal, [1988] O.J. No. 1486 at page 8.
Decision
[20] The motion for security for costs is dismissed. If the parties cannot agree on the costs of this motion, I will accept brief written submissions within twenty days.