Court File and Parties

COURT FILE NO.: 551592 DATE: 20160906 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michael Shumak, Plantiff/Responding Party AND: Paul Oulahen, Sheppbonn Limited, 1085372 Ontario Limited and Thanh Nguyen, Defendants/Moving Parties

BEFORE: S.F. Dunphy J.

COUNSEL: B. Morrison, for the Defendants/Moving Parties T. Sieber, for the Plaintiff/Responding Party

HEARD: August 18, 2016

Endorsement

[1] This is an application for security for costs brought by the defendants on the basis that the plaintiff has unpaid costs orders outstanding in favour of the corporate defendants and that the action itself is in any event frivolous and vexatious.

[2] This motion should have been brought before a Master, given the mandatory language of Rule 37.04 of the Rules of Civil Procedure. It was not. I refrained from adjourning the motion on the spot to be brought back before a Master only because the material I had by then read was so replete with improper attempts by both sides to introduce scandalous and extraneous allegations that I concluded it would be unfair to inflict such a hash of smoke and distractions upon my over-worked colleagues afresh when my list happened to have enough time available to deal with this motion. None should presume to try their luck at obtaining such license in future.

[3] Our intake clerks cannot be expected to catch each instance of counsel overreaching when filling out a confirmation form. The Toronto region walks a fine tightrope in allocating finite and scarce resources to ensure reasonable times to decision for both trials and motions. That balance would soon be shattered were we to lose the critical support of the Masters in capably processing the workload delegated to them by Rule 37.04 of the Rules of Civil Procedure. Undermining this division of labour can only endanger the very existence and continuation of the institution of Masters as necessary parts of our system and cannot be condoned.

[4] I have decided to allow the motion and order the plaintiff to post security for costs in favour of three of the four defendants (all except Mr. Oulahen). As against these defendants, I find that the action is frivolous and vexatious having been brought for the apparent purpose of influencing the plaintiff’s bankruptcy proceedings and pressuring his creditors and there is also undisputed evidence that the costs awards made in prior proceedings in favour of the corporate defendants remain unpaid. The plaintiff’s plea of impecuniosity falls on deaf ears as there is ample evidence that the plaintiff has unexplained resources and has been playing a game of cat and mouse with his creditors. However, by reason of the deliberate breach of Rule 37.04 of the Rules of Civil Procedure I have decided to deprive the moving party defendants of their costs.

[5] I find that I cannot extend these findings to Mr. Oulahen. The claim against him certainly faces considerable headwinds. However, I am in no position on a motion such as this to make findings of credibility on the central question underlying the complaint against him of having fabricated a complaint to police. Undertaking an examination to that level runs the risk of seeing this motion converted to a surrogate for a summary judgment motion which I ought not to do. Until such a finding can be made, it cannot be said that the claim against him at least is so weak as to fail to cross the low threshold of not being frivolous and vexatious.

[6] The “primary” claim of the plaintiff contained in the statement of claim in this action is for malicious prosecution. The damages alleged to arise from this include general damages, loss of reputation, mental anguish and similar matters as well as special damages for legal defence costs and loss of income. The question of whether some or all of the damages claimed would be considered after-acquired property of the bankrupt that vest in the Trustee under s. 67(1)(c) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 given the plaintiff’s status as an undischarged bankrupt was not argued before me and I express no view on the matter herein. The Trustee is neither a party to the action nor this motion.

Facts

[7] The facts are easily summarized and readily explain the unhappy state of the relationship between the parties.

[8] The two corporate defendants 1085372 Ontario Limited (or “108”) and Sheppbonn Limited (“Sheppbonn”) were at one time lessors of two properties to two companies owned and controlled by the plaintiff, Mr. Shumak. Mr. Shumak was a guarantor of both leases.

[9] In early 2011, Mr. Shumak’s companies defaulted on their respective leases. Mr. Shumak suggests that the defaults were a consequence of his loss of a major client who passed away in that time frame. It is in any event fair to observe that Mr. Shumak and his companies were entering a period of financial stress at that time.

[10] The two landlord companies issued appropriate notices of default and, in due course, commenced litigation proceedings arising from the defaults. Sheppbonn obtained judgment in the amount of $111,641.62 plus costs of $8,538.67 on April 23, 2012. 108 obtained judgment in the amount of $303,878.60 plus $9,106.50 in pre-judgment interest and $3,809.72 in costs on April 27, 2012. Mr. Shumak as guarantor of both leases was found jointly and severally liable and is thus a judgment debtor in respect of both judgments.

[11] Both judgments were obtained on motions for judgment that Mr. Shumak failed to defend (they were not, however, default judgments since the actions were defended). Neither judgment has ever been set aside nor has anything been paid in partial satisfaction of them.

[12] Despite the judgments being more than four years old at this point, Mr. Shumak has continued to peddle the allegation that the leases underlying the judgments were tainted with illegality. The allegations concerning the two leases are as bald as they are unproven. Further, the legality of the leases and the debts that arose under them has been a matter of clear res judicata for four years. Despite this rather obvious observation, Mr. Shumak initially made the allegation in his original statement of defence (i.e. before the two judgments against him) and then repeated them in his statement of claim and affidavit in this action.

[13] The tenuous claim to relevance said to underlie the repetition of these allegations bears no serious scrutiny. I infer a desire to lash out at a creditor who, as shall be seen, has been persistent in attempting to prod the trustee in bankruptcy to uncover the sources of Mr. Shumak’s continued comfortable lifestyle and the truth behind transactions in the months prior to bankruptcy that saw substantially all of Mr. Shumak’s assets disappear from reach in what are alleged to be purely bona fide transactions. I have utterly disregarded these scandalous and, in my view, highly improper allegations advanced by Mr. Shumak. Far from demonstrating the alleged malice of Mr. Oulahen, the repeated dredging up of these allegations of illegality in this proceeding serves primarily to underscore the malice lying beneath the surface of the plaintiff’s claim. That impression is buttressed by the scandalous and utterly irrelevant references in Mr. Shumak’s affidavit to other proceedings involving Mr. Oulahen more than fifteen years in the past, allegations that I have similarly ignored.

[14] The judgment creditors (Sheppbonn and 108) sought to enforce their judgments and Mr. Shumak was examined at an examination in aid of execution on August 22, 2012. Motions to set aside the judgments obtained were alleged to be imminent. They were not.

[15] The parties are in substantial dispute as to what took place in the corridors before and after the actual examination. According to Mr. Oulahen, Mr. Shumak said that he would rather file for bankruptcy before paying anything under the two judgments. His claim is corroborated by an affidavit of Mr. Oulahen’s lawyer at the examination – Mr. Michael Mazucca. Mr. Shumak presents only a moderately different version of this exchange in his own affidavit, claiming that he merely “explained” that he would have no choice but to file for bankruptcy if he could not set the judgments aside.

[16] The more substantive dispute concerns an exchange alleged by Mr. Oulahen to have occurred during a private conversation with Mr. Shumak outside the examination room that was overheard by no one else.

[17] Mr. Oulahen alleges that Mr. Shumak told him that he would kill him if any efforts were made to enforce the judgment debts, underscoring this threat with a slashing motion across his own throat. Mr. Oulahen claims that he told no one of the threat at the time. However, later that evening he noticed that his car had been keyed. Mr. Oulahen’s car would have been easily identifiable by its vanity plate carrying his name. Mr. Oulahen claims to have called the police to report the damage to his car during which complaint he was also asked to provide a statement regarding the death threat made earlier. Mr. Oulahen does not admit to having pressed the police into pursuing charges or indeed having had anything whatever to do with the laying of the charges beyond his initial complaint in connection with the complaint about the damage to his car. He was not cross-examined on his affidavit.

[18] Some weeks later, Mr. Shumak was charged criminally with uttering a death threat. Mr. Oulahen alleges that shortly after the charges were laid, he found dead animals thrown on to his driveway.

[19] In connection with the criminal charge, a recognizance was entered into obliging Mr. Shumak to stay away from Mr. Oulahen or any of his properties. Mr. Shumak was charged and later convicted of breaching that recognizance following an incident in August 2013 where he was observed in the parking lot of the building where Mr. Oulahen’s office is located. Mr. Nguyen provided the police with a statement in respect of that incident.

[20] Mr. Shumak responded to this detailed account with a short blanket assertion that Mr. Oulahen’s story is a fabrication and a bald statement that Mr. Nguyen “was a party to Oulahen’s prosecution of me”. He does not deny that Mr. Oulahen’s car had in fact been keyed nor does he provide any details of any steps alleged to have been taken by Mr. Oulahen to secure the laying of charges. He does not deny that a private conversation between the two took place at the hearing. He does not deny knowing where Mr. Oulahen’s car was located when it was keyed. He denied throwing the dead animals on to Mr. Oulahen’s driveway after charges were laid, but does not deny that the incidents actually occurred. His affidavit offers no details of the means by which any of the other parties played any part in the prosecution of the charges.

[21] On January 23, 2013, Mr. Shumak made an assignment in bankruptcy. The Statement of Affairs accompanying his assignment indicated $9,000 in assets, $9,500 in exempt assets $777,354 in unsecured creditor claims. The corporate defendants’ judgment claims thus amounted to approximately half of the total debts admitted by the plaintiff when he made his assignment.

[22] The executed Form 79 that also accompanied the assignment answered “yes” to the questions of whether he had sold or disposed of any of his property or had any property seized by a creditor in the year prior to making the assignment. His more detailed answers in respect of these answers in the questionnaire revealed that he held 100% of the shares of a corporation named First Delta Holdings Limited whose sole asset in turn was a condominium property in Florida. The Florida property had been transferred to his mother in December 2012 and the Form 79 noted only that his mother had paid the expenses of the property, loaned $275,000 to First Delta in 1999 and had lived in the property 50% of the time. The answer also referenced the loss through forfeiture of shares of a company named Linus Entertainment upon non-payment of a $100,000 loan at a time when “the value of the shares was almost equal to the amount of the loan”.

[23] In April 2015 Mr. Shumak was convicted of the charge of breach of recognizance for which he received a conditional discharge. He has appealed that conviction and is awaiting the release of a decision. Mr. Shumak’s affidavit states that he was acquitted of the charge in relation to the alleged death threat on April 15, 2015. The reasons for the decision of the judge in that decision have not been provided to me.

[24] Mr. Oulahen’s affidavit contains indications that Mr. Shumak has maintained a lifestyle post-bankruptcy that has not been adequately explained. His most recent statement of income and expenses to the trustee reveals monthly expenses of $3,231.70 the source of which is alleged to be his spouse. The statement thus suggests that Mr. Shumak receives almost $39,000 in annual support from his spouse (from whom he is not separated). Mr. Shumak’s tax return for the 2014 year indicates that his spouse had a net income (from self-employment) of only $28,676.84. His tax return for 2013 gave her net income for that year as $62,813.91, also from self-employment.

[25] In addition to Mr. Shumak’s daily living expenses, there is the matter of his 6 bedroom home at 21 Bowan Court in Toronto. An MLS listing for that property indicates that it was leased for $5,000 per month (or $60,000 per year) in December 2013. No evidence has been presented to explain the source of the funds necessary to pay these leasing costs. Mr. Shumak has provided no evidence of his wife’s means to support him in this manner beyond the 2014 tax return that attributes a clearly insufficient income to her to explain these expenditures.

[26] As of August 2016 Mr. Shumak remains an undischarged bankrupt. He is clearly frustrated with the prolongation of that status.

[27] On January 20, 2015, the trustee in bankruptcy issued a statement of claim attacking the alleged forfeiture of Mr. Shumak’s shares in Linus. That action is still pending.

[28] On April 9, 2015, the two corporate defendants brought proceedings against, among others, Mr. Shumak’s mother Rene Shumak. The statement of claim attacks the transactions involving First Delta and the Florida property. It also alleges that Rene Shumak was the registered owner of the former residence of Mr. Shumak at 17 Harlington Road in Toronto on behalf of Mr. Shumak who was the beneficial owner of the property. The property was sold in April 2012 shortly prior to the judgments being obtained by defendants. The statement of claim attacks the bona fides of certain mortgages placed on the property prior to sale and alleges the proceeds of sale of the home continue to be held in trust for Mr. Shumak. That action is also still pending.

[29] Mr. Shumak’s statement of affairs revealed nothing about his former interest in 17 Harlington Road nor does his affidavit contradict the claim in Mr. Oulahen’s affidavit that he was in fact the beneficial owner of this property registered in his mother’s name prior to its sale in the year prior to bankruptcy – a fact that his mother’s statement of defence admits.

[30] The statement of claim in this action was issued on April 25, 2016. On May 2, 2016, Mr. Shumak’s bankruptcy counsel forwarded a copy of the statement of claim to the trustee in bankruptcy and took the position that neither Mr. Oulahen nor Mr. Nguyen could continue as inspectors in light of the claim. The letter went on to suggest that by reason of the failure of Mr. Shumak to have received an absolute discharge “serious questions have arisen concerning the conduct of the bankruptcy”.

Issues to be decided

[31] The following issues require decision on this motion:

a. Are there unpaid costs awards notwithstanding the plaintiff’s bankruptcy? b. Is the action frivolous or vexatious? c. Is the plaintiff entitled to relief by reason of alleged impecuniosity? d. If an order for security for costs is warranted, in what amount and subject to what terms?

Analysis and Discussion

[32] The plaintiff submits, and I agree, that the analysis to be undertaken in a motion for security for costs is a two-step process. While there is no such thing as a prima facie entitlement to security for costs (Zeitoun v. Economical Insurance Group, 2009 ONCA 415, 96 O.R. (3d) 639 (CA)), the moving party bears the onus of establishing the existence of one or more of the predicates set forth in Rule 56.01(1) of the Rules of Civil Procedure whereupon the court must consider what order, if any, would be just (DeFilippo v. DeFilippo, 2013 ONSC 5460 at para. 25). Where, as here, the plaintiff pleads impecuniosity as a reason why such an order would be unjust, the burden lies upon the plaintiff to justify that plea.

(a) Are there unpaid costs awards outstanding in favour of the moving parties?

[33] Rule 56.01(1)(b) of the Rules of Civil Procedure authorizes a defendant to apply for security for costs where “the defendant …has an order against the plaintiff…for costs in the same or another proceeding that remain unpaid in whole or in part”.

[34] There is undisputed evidence that there are unpaid costs awards outstanding against the plaintiff in favour of the two corporate defendants from other proceedings. The evidence establishes costs orders in favour of Sheppbonn dated April 23, 2012 in the amount of $8,538.67 and dated December 19, 2012 in the amount of $2,000 (for a total of $10,538.67) and in favour of 108 dated April 27, 2012 in the amount of $9,106.350.

[35] While the two corporate defendants are stayed from taking proceedings to enforce the costs orders by reason of the bankruptcy, there is no question that the costs orders remain outstanding in the sense that they are still unpaid and Mr. Shumak has not been discharged from bankruptcy.

[36] While I agree with the plaintiff that the costs awards made in favour of the two corporate defendants cannot underpin a motion for security for costs made by the two individual defendants, I can see no reason why the fact of bankruptcy ought to disentitle the two corporate defendants from relying upon their unpaid costs orders to satisfy the pre-conditions established by Rule 56.01(1)(b) of the Rules of Civil Procedure and no authority to the contrary has been cited to me. This does not mean that it will be just to make an order for security for costs after examining the facts. Indeed, in most cases I expect it would not as the fact of undischarged bankruptcy would normally be a good indicator of impecuniosity.

[37] However, I conclude that I may consider this motion – at least in relation to the two corporate moving parties – notwithstanding the subsequent (undischarged) bankruptcy of Mr. Shumak. The predicate of this motion under Rule 56.01(1)(b) of the Rules of Civil Procedure has been established as regards the two corporate defendants/moving parties.

(b) Is the action frivolous and vexatious?

[38] Rule 56.01(1)(e) of the Rules of Civil Procedure also permits the court to consider granting an order for security for costs where the moving party defendants are able to establish that “there is good reason to believe that the action is frivolous and vexatious” and that the plaintiff has insufficient assets in Ontario to pay the defendants’ costs. The plaintiff admits the second part of the test (although claiming impecuniosity). Does the evidence before me establish the first part of the test that there is “good reason to believe that the action is frivolous and vexatious”? I conclude that it does for all of the defendants except Mr. Oulahen.

[39] The moving parties have filed three affidavits intended to demonstrate that the action of the plaintiff is frivolous or vexatious in order to satisfy the precondition in Rule 56.01(1)(e) of the Rules of Civil Procedure. Mr. Shumak filed a single affidavit in reply. His affidavit contained almost no discussion of the merits (or lack thereof) of his malicious prosecution suit. I am thus left with a largely uncontradicted body of evidence from the moving party defendants. What contradiction has been offered by the plaintiff is largely of the “en bloc” denial nature offering few if any details in support.

[40] A security for costs motion founded upon Rule 56.01(1)(e) of the Rules of Civil Procedure should not be treated as a mere pleadings motion. Evidence going to the merits is admissible and may be considered. While I am mindful of (and agree with) the admonition of Nordheimer J. in Intellibox Concepts Inc. v. Intermec Technologies Canada Ltd., 2005 ONSC 13787 (at para. 6) that a motion for security for costs ought not to be turned into a substitute for a motion for summary judgment, I am not required to assume the facts pleaded in the statement of claim are true either.

[41] In my view, it is proper on a motion such as this to take a “hard look” at the evidence tendered – at least similar to the level of assessment of the merits undertaken in connection with setting aside a default judgment – to see whether the claims or defences appear to have a sufficient air of reality to them. While the bar may not be very high, there is a bar to be cleared.

[42] Where the moving parties’ evidence has established grounds for believing that the plaintiff’s claim lacks in bona fides and suffers from fatal flaws, the plaintiff takes a considerable risk in falling back on blanket statements that fail to address these serious issues in any detail.

[43] Turning to an examination of the statement of claim in this case, there are three distinct causes of action pleaded: malicious prosecution, tortious abuse of process and conspiracy to injure. As currently drafted, the claim is quite hopelessly bald and devoid of particulars as regards anything but the claim of malicious prosecution. I have no hesitation in finding that the “claims” of tortious abuse of process and conspiracy to injure are hopelessly flawed and are frivolous and vexatious as pleaded. The plaintiff has not attempted to support these bald and flawed claims with even a scintilla of evidence on this motion.

[44] I therefore find that there is reason to believe that each of the claims of abuse of process and conspiracy to injure are frivolous and vexatious and thus satisfy the pre-condition of Rule 56.01(1)(e) of the Rules of Civil Procedure. This conclusion would apply to all of the defendants.

[45] The malicious prosecution claim is at least potentially in a different category. The fundamental premise of the claim – an allegedly fabricated complaint to the police – is quintessentially a credibility-based fact. Mr. Shumak claims that Mr. Oulahen fabricated the story; Mr. Oulahen claims he did not and that the threat was in fact uttered. The claim is silent as to the particulars of the role if any played by the other defendants in this prosecution.

[46] There are four well-established elements that must be proved to make out a malicious prosecution claim. It must be shown (i) that the prosecution was initiated by the defendant; (ii) that it was terminated in favour of the plaintiff; (iii) that there was a lack of reasonable and probable grounds; and (iv) that the defendant was motivated by malice.

[47] The statement of claim is fundamentally flawed in addressing these four requirements as regards the defendants other than Mr. Oulahen. The complaint to the police giving rise to the prosecution of the plaintiff was that of Mr. Oulahen. No action leading to the prosecution taken by any of the other defendants is pleaded with any particularity at all. The complaint of Mr. Oulahen is pleaded to have been made with the “knowing agreement and assistance of Nguyen”. What form that “assistance” took is a mystery and particulars of the alleged agreement are entirely lacking. The claim is even thinner when considered from the perspective of the two corporations whose lack of physical existence renders them quite impervious to such threats and unable to complain about them without the assistance of others.

[48] Mr. Shumak’s affidavit does not improve upon the bald nature of the pleading in relation to the two corporations or Mr. Nguyen. It contains no specific information about any of them in relation to the laying of the criminal charge of uttering a death threat for which he was acquitted. To the contrary, Mr. Shumak’s affidavit claims that the charge against him “was based solely on Oulahen’s own false allegations to the police”, an admission that on its face precludes attributing the prosecution to the actions of the other defendants.

[49] Mr. Nguyen has filed an affidavit swearing – without any contradiction from Mr. Shumak – that he did not witness the alleged death threat on August 22, 2012 nor did he have any involvement in the police investigation of it. His involvement in the conviction for breach of recognizance is not relevant to this claim.

[50] As regards each of the three defendants other than Mr. Oulahen, there can be no doubt that the plaintiff’s claim is entirely without any support or foundation. I therefore find that there is reason to believe that the claim as against those three defendants is frivolous and vexatious and that the onus upon them pursuant to Rule 56.01(1)(e) of the Rules of Civil Procedure has been satisfied.

[51] I turn now to examine the malicious prosecution claim as pleaded – and supported in the evidence – as against Mr. Oulahen.

[52] The first hurdle the plaintiff must clear in advancing this claim is to establish that the prosecution of the claim was initiated by Mr. Oulahen.

[53] The charges against Mr. Shumak were not the result of a private prosecution. While Mr. Oulahen admits to having made the initial complaint to the police he certainly did not make the decision to prosecute. That decision was made by a Crown Attorney after receiving the results of the police investigation.

[54] While a public prosecution such as the present one will not ordinarily give rise to exposure to malicious prosecution suits against witnesses or complainants, the court in Kefeli v. Centennial College of Applied Arts and Technology, 2002 ONCA 45008 found (at para. 24) that a complainant may “in exceptional circumstances” be treated as the prosecutor where:

▪ the complainant desired and intended that the plaintiff be prosecuted; ▪ the facts were so peculiarly within the complainant’s knowledge that it was virtually impossible for the professional prosecutor to exercise any independent discretion or judgment; and ▪ the complainant procured the institution of proceedings by the professional prosecutor, either by furnishing information which he knew to be false, or by withholding information which he knew to be true, or both”

[55] Despite the near total lack of any evidence from Mr. Shumak on the question, I do not think I can fairly conclude that the allegation of the existence of the exceptional circumstances required by Kefeli – at this early stage – is so meritless as to fail to clear even the low hurdle of not being frivolous or vexatious. While a “hard look” at the evidence is called for, the standard is not a high one.

[56] Mr. Oulahen’s evidence is that he relayed the death threat complaint only after finding that his car had been “keyed” and did so in the context of reporting that property damage. Mr. Shumak contradicts the story entirely and claims it was all a fabrication. He has no evidence (excluding bald and entirely unsupported allegations) that Mr. Oulahen offered to testify at trial (although he did in fact testify), that he desired charges be laid or that he sought to pressure the Crown into proceeding with them. There is no evidence as to what impact if any the independent police investigation into the keying of Mr. Oulahen’s car or the deposit of dead animals on Mr. Oulahen’s property may have played in the prosecutor’s decision to proceed. The decision of the trial judge has not been tendered into evidence and thus neither supports nor undermines the allegation of a fabricated story.

[57] Despite the evident frailties in Mr. Shumak’s case in this regard, it would be an error for me to treat this as a summary judgment case where I might determine to prefer the testimony of one witness over the other. Were Mr. Shumak’s evidence to be fully accepted and Mr. Oulahen’s evidence to be entirely rejected, the claim that Mr. Oulahen satisfies the Kefeli criteria for being treated as a prosecutor might potentially succeed. I must find that the allegation clears the frivolous and vexatious threshold, if only by a slender margin. The required “air of reality” at least is present if the premise of a fabricated complaint is granted. Without a basis to assess credibility, I cannot dismiss the allegation at this early stage.

[58] The second criterion to be established in a malicious prosecution suit is that Mr. Shumak was acquitted of the charge. He was convicted of another charge it is true, but there seems little basis to contest the basic fact that Mr. Shumak was not convicted of uttering a death threat on August 22, 2013. The decision of the judge acquitting him has not been placed before me and I cannot speculate as to what reasons if any lie behind that decision. I certainly cannot find that this aspect of the claim is frivolous and vexatious.

[59] The third criterion is to consider whether there was a lack of reasonable or probable grounds for the prosecution. Given the allegation of an entirely fabricated complaint I cannot find that this aspect of the claim is frivolous and vexatious unless I can find that the allegation of fabrication is itself frivolous and vexatious. Such a finding would require me to assume a summary judgment role and assess credibility to make that finding. That is not my role on a motion such as this.

[60] Finally, the plaintiff bears the onus of establishing malice. Both the statement of claim and his affidavit seek to demonstrate malice primarily in terms of what are in my view nothing more than collateral attacks on judgments of the court (that Mr. Shumak has never succeeded in setting aside) or instances of Mr. Shumak’s own malice [1]. However, if I cannot dismiss the allegation of a fabricated complaint to the police as being frivolous and vexatious, I cannot dismiss an allegation of malice related to it on the more general basis of punishing a debtor without also assessing credibility. Once again, the allegations may appear gossamer thin. They do at least make it past the “air of reality” examination that I think is as far as I may take my review.

[61] In conclusion on this point, I find that the claims against all of the defendants except Mr. Oulahen clearly fail to pass even the relatively low threshold of examination for being frivolous and vexatious. As against Mr. Oulahen, on the other hand, I could not reach such a conclusion without entering into an assessment of the credibility of the two witnesses (Mr. Oulahen and Mr. Shumak). Entering into the analysis at that level risks turning this motion into a surrogate for a summary judgment hearing which is to be avoided.

(c) Is the plaintiff entitled to relief on the basis of impecuniosity?

[62] The plaintiff claims to be impecunious and urges upon me that I should not allow a meritorious claim to be stopped in its tracks by reason of his impecuniosity: Larabie v. Montfils, 2004 ONCA 11299.

[63] The onus to establish that, by reason of impecuniosity, it would be unjust to make an order requiring the plaintiff to post security for costs rests with the responding party plaintiff: DiFilippo at para. 27-29.

[64] While the plaintiff’s status as an undischarged bankrupt might seem at first blush to be good evidence of his state of impecuniosity, I find in the very particular circumstances of this case that the plaintiff has failed to discharge the onus upon him.

[65] Firstly, I am not satisfied on the evidence that the plaintiff is impecunious notwithstanding Mr. Shumak’s status as an undischarged bankrupt and his own evidence that he has been unable to earn any income since filing for bankruptcy in 2013. The fact of being an undischarged bankrupt is by no means sufficient evidence of impecuniosity for purposes of a motion for security for costs: Shuter v. Toronto Dominion Bank, 2007 ONSC 37475.

[66] Mr. Shumak is a first-time consumer bankrupt who has not been discharged for more than three years. The reasons for this state of affairs are apparent. Despite three years of having essentially no income Mr. Shumak continues to live in a manner and style indicative of resources not fully explained.

[67] Mr. Shumak is living in a home in Toronto with his spouse and son that appears to be leased at an annual rent of $60,000 or more per year. He has been seen driving a Mercedes automobile (including on the occasion of his breach of recognizance in 2013) and attending professional sports events and going on foreign vacations. Mr. Shumak’s declared income of $0.00 and assets of little more would not explain this lifestyle. His spouse’s declared income similarly would not even cover the apparent rent on the family home let alone the nearly $40,000 in other expenses he claims to be paying with her assistance.

[68] Mr. Shumak has also been a significant consumer of legal resources in recent times. In addition to his criminal defence costs (including an appeal of his conviction for breach of recognizance), Mr. Shumak has lawyers representing him in the bankruptcy proceedings as well as in this action. He has not suggested that these services have been provided pro bono, on a Legal Aid certificate or under a contingent fee arrangement.

[69] Mr. Shumak plainly has resources that he has been able to access to continue to live in the style to which he has become accustomed. None of those resources have been devoted to satisfying his creditors in whole or in any part. His affidavit provides no particulars of those resources beyond denying lavishness. I am entirely unsatisfied with his rote denials and find the entirety of the evidence to raise very strong suspicions that Mr. Shumak has not been forthcoming about his financial capacity.

[70] The uncontradicted evidence is also very strongly suggestive of transactions having been undertaken to frustrate creditors after Mr. Shumak’s financial troubles began to manifest themselves. These include the transfer of a condominium unit to his mother weeks before his January 2013 bankruptcy, the sale of his former principal residence and the consent forfeiture of his shares in a private company in December 2011 shortly before the corporate defendants obtained judgment against him in April 2012 and after his financial difficulties had manifested themselves.

[71] There is no doubt that these transactions took place, even if Mr. Shumak rejects any untoward intentions being attributed to them.

[72] These highly suspicious transactions have been attacked in proceedings that are still pending. Whether these transactions will prove to have been fraudulent conveyances or transactions at undervalue at the end of the day I cannot say. The trustee in bankruptcy and some of the defendants are pursuing them. The nature and timing of these transactions is sufficiently suspicious that the blanket dismissal of the merits of these claims by the plaintiff cannot simply be accepted at face value.

[73] The plaintiff has not satisfied me that he lacks the resources to satisfy an order for security for costs should one be made. Rather, in these circumstances, I am satisfied that it would be just to make such an order and propose to do so.

[74] I entirely reject the plaintiff’s attempt to blame his bankruptcy proceeding on the defendants. His statement of affairs disclosed very substantial debts to a wide variety of creditors, including credit cards and luxury car sellers, over and above the judgment debts owed to the corporate defendants. The same statement of affairs disclosed almost no assets and claimed that his business’ income suffered as a result of the death of a major client. The defendants may have been the most vocal creditors seeking payment of their claims, but they are hardly the only creditors.

[75] It is evident to me that the plaintiff has engaged in a very thinly disguised attempt to avoid his debts by attacking his most vocal and active creditors. He has lost no excuse – however flimsy - to raise the utterly irrelevant and scandalous charge that the leases underlying the judgments against him were tainted by (unproven) illegality. Mr. Shumak’s case continues to be founded in significant measure on collateral attacks on prior court orders that he has neither appealed nor set aside and attacks on Mr. Oulahen for having played any role in securing such orders.

[76] The addition of Mr. Nguyen and the two corporate defendants to this claim on grounds also contributes to the impression that this claim cannot pass any reasonable “smell test” of bona fides.

[77] It is quite instructive that the plaintiff issued this claim on April 25, 2016 more than one year after his acquittal on the death-threat charge and then followed it up almost immediately with a letter to his trustee in bankruptcy on May 2, 2016 seeking the removal of Mr. Oulahen and Mr. Nguyen as inspectors in his bankruptcy estate. These letters lead me to infer that this litigation has been initiated to create “leverage” to attempt to muzzle the creditors whose objections to possibly fraudulent transactions are impeding his goal of being released from his significant debts without making any payments to creditors.

[78] I therefore find that the moving parties (other than Mr. Oulahen) have satisfied the requirements of Rule 56.01(1)(e) – and, in the case of the two corporations, Rule 56.01(1)(c) – of the Rules of Civil Procedure. I also find that it would be just to make the requested order requiring the plaintiff to post security for costs of the claim for these three defendants.

(d) If an order for security for costs is warranted, in what amount and subject to what terms?

[79] The defendants have filed a proposed bill of costs in the amount of $115,971.90 on a partial indemnity basis. The proposed bill of costs is of course merely an estimate – it may prove to be higher or lower depending upon the way in which the case proceeds.

[80] Given the nature of the claim (malicious prosecution) and the existence of the bankruptcy proceedings, the defendants have anticipated that motions to review or obtain access to evidence in the criminal or bankruptcy proceedings may be necessary. It seems reasonable to me in these circumstances to anticipate some additional layers of complexity being added to the discovery process by reason of the criminal and bankruptcy proceedings. The plaintiff has offered no concrete rebuttal to the proposed bill of costs beyond the blanket “it’s too much” and a plea of impecuniosity to the point where any order is alleged to be too much.

[81] In my view, the defendants’ draft bill of costs is a fair and reasonable estimate of costs through to the end of trial. The defendants’ costs estimate allocates approximately 50% of the estimated fees to procedures prior to trial.

[82] While “pay as you go” orders are quite routine in security for costs motions, the plaintiff has declined to provide me with any submissions that might provide me with any basis on which to craft a reasonable “pay as you go” timetable, reasoning that any order would be an effective end to the proceedings given the plaintiff’s alleged impecuniosity. Without material input from the plaintiff, I am left to my own devices to fashion a reasonable “pay as you go” regime.

[83] In my view, it would be just and reasonable to require the plaintiff to post security for the costs of the defendants other than Mr. Oulahen in the amount of $115,971.90 on the following schedule: (i) 50% immediately; and (ii) 50% within 45 days of the matter being listed for trial.

[84] Leave is reserved to the moving party defendants to move to increase the amount of security for costs prior to the second instalment coming due if there is evidence that costs incurred and to be incurred will likely exceed the estimate upon which this order has been based in a material amount. Such a motion, needless to say, would be brought before a master.

[85] It would not be fair or reasonable to pro-rate the costs to be posted to reflect the fact that I have not been convinced that Mr. Oulahen is entitled to an order for security for costs in his own right. The defendants are entitled to have common counsel and it cannot be said that Mr. Oulahen’s retainer of the same counsel as his co-defendants would materially increase the costs needed to be incurred by the defence team. I decline to give the plaintiff credit for the fact that the defendants have reasonably chosen to have common counsel.

Disposition

[86] Accordingly, I am granting the motion in respect of all of the defendants except Mr. Oulahen. The plaintiff shall be ordered to post security for costs of the three defendants in the amount of $115,971.90 with 50% to be posted immediately and 50% to be posted within forty-five days of the matter being listed for trial.

[87] Leave is reserved to the three defendants for whose benefit the order has been made to apply to increase the amount of security for costs should it appear that costs incurred and to be incurred will materially exceed $115,971.90 on a partial indemnity basis through to the conclusion of trial, such application to be made if at all within forty-five days of the matter being listed for trial.

[88] By reason of the moving parties having ignored Rule 37.04 of the Rules of Civil Procedure, I think it appropriate to send a stern message and deprive the successful moving parties of their costs. There will accordingly be no order as to costs.

S. F. Dunphy J.

Date: September 6, 2016 (names corrected September 14, 2016 in paras. 57 & 58)

[1] Mr. Shumak repeats in pleadings and affidavit the utterly irrelevant allegation that his company’s rent on the long-since terminated lease had been artificially inflated with a high face rent. If the face rent was meant to support a higher valuation of the property, termination of the lease achieved the opposite result in any event. The repetition of this offensive charge – coupled with gratuitous allegations of illegality – are at best collateral attacks on judgments rendered or at worse crude attempts to obtain leverage on his creditors to compromise them. I find that the repetition of these charges is motivated purely and simply by malice.