Court File and Parties

COURT FILE NO.: CV-13-00479996-0000 DATE: 20160824 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ramos & Ramos Investments Inc., Applicant AND: Can-Med Pharma Inc. and Minister of Health (Health Canada), Respondent

BEFORE: R. F. Goldstein J.

HEARD: August 24, 2016

APPEARANCE: Cindy Cohen, for the Applicant Hashim Syed, for the Respondent

Endorsement

[1] The Applicant alleges that during the course of a receivership, it took an assignment of the assets of a third party company. Royal Bank of Canada had general security over those assets but transferred them without consent to the Respondent. The Applicant seeks to recover those assets from the Respondent.

[2] On March 3, 2016 Justice Dunphy ordered that the Applicant post security for costs by April 4, 2016 in the amount of $25,000.00. He also ordered that the Respondent file a new affidavit containing particulars of the alleged fraud by April 4, 2016, failing which the allegations were deemed withdrawn. Justice Dunphy also dismissed a motion to turn the application into an action. Justice Dunphy later granted both parties an extension to April 18, 2016. The Applicant has not posted security for costs and now says that it cannot post more than $8000.00. The Respondent has not filed a new affidavit.

[3] There are two motions before the Court: a motion by the Respondent to dismiss the Application for failure to post security for costs, and a motion by the Applicant to vary Justice Dunphy’s order to post $8000.00 as security for costs. I agree that I have the jurisdiction to raise or lower the amount in Justice Dunphy’s order.

[4] The Applicant’s motion should be dismissed and the Respondent’s motion should be granted. The two motions are factually and legally intertwined.

[5] The Applicant is a British Virgin Islands shell company. At the time of the hearing before Justice Dunphy a Canadian subsidiary had US$2500.00 in a Canadian bank account. On July 25, 2016 the subsidiary had C$7550.00 and US$472.26 in its Canadian bank accounts. The subsidiary is not a party to the application.

[6] I find that Mr. Alessandro, the principal of the Applicant, could have determined, through reasonable diligence, that the Applicant would have been unable to post security in accordance with Justice Dunphy’s order. Although Mr. Alessandro indicated that he would try to obtain funds from his family, at his cross-examination on his affidavit he refused to answer questions about the availability of family money. Furthermore, Mr. Alessandro has provided no actual evidence that he does not have access to funds, other than a bare assertion in his affidavit and a bank account of the subsidiary. He refused to provide a financial statement at the examination so the liabilities of the subsidiary are unknown. Mr. Alessandro simply said he would comply with an order without explaining how he would do so. The evidence falls short of what is required in these circumstances: Leonard v. Prior (1994), 118 D.L.R. (4th) 442, [1994] O.J. No. 2045 (Gen.Div.) at paras. 22-23; Alternate Energy Corp. v. Rothman, 2007 CarswellOnt 7119 (Ont.Master).

[7] I agree with the Respondent that all aspects of his financial situation at the time of the hearing before Justice Dunphy could have been determined with due diligence: DeGroote v. Canadian Imperial Bank of Commerce, [1999] O.J. No. 2313 (C.A.) at para. 3. There are no exceptional circumstances here that would justify relaxing the standard. I agree with the Respondent that the $8000.00 amount is, in the circumstances of this case, a token amount: Michigan National Bank v. Axel Kraft International Ltd., [1999] O.J. No. 418, 30 C.P.C. (4th) 344 (Gen.Div.) at para. 17.

[8] As Laskin J.A. stated in Duffin v. NBY Enterprises Inc. et. al., 2010 ONCA 765 at para. “a court should always be reluctant to dismiss a claim on grounds unrelated to its merits.” Laskin J.A also noted that a court must consider the prejudice to the parties. In my view, although the Applicant will suffer the ultimate prejudice – dismissal of the application – that is outweighed by the litigation risk that the Respondent must take. That litigation risk is that it will have no means of enforcing a costs order if it wins. The proposed security is not even in the possession of the Applicant – it is in the possession of a subsidiary with unknown liabilities. The Applicant has already sought and received an extension of time. In my view, even though the Applicant’s case may have merit (it is difficult to know based on the evidentiary record before me) it would be unfair to the Respondent to take that risk. The underlying purpose of the order was to prevent an unfair situation to the Respondent. Varying the order will not do that. It will do the opposite.

[9] Finally, this is a situation where two corporate entities (one of them an offshore shell corporation) are battling over nascent intellectual property rights. This case does not engage access to justice issues. For example, this is not a case where an individual human being of modest means is unable to vindicate (or defend) his or her legal rights against a party with more financial power.

[10] I also agree with the Respondent that the allegations of fraud are separate and apart from the security for costs application. The fraud allegations are now deemed withdrawn. The Applicant has made an allegation that the collateral was transferred and it is a clear-cut case under the PPSA. The Applicant now asserts that the Respondent no longer has a defence on the merits, which should influence the security for costs issue. I am simply not in a position to decide that issue based on the evidence before me. I acknowledge that the Respondent now has a more limited defence, but I cannot say based on the record that it could not succeed. That would require actually hearing and deciding the application.

[11] It follows that in the circumstances of this case if the Applicant’s motion cannot succeed, the Respondent’s motion must be granted. The Applicant has had the opportunity to raise funds and has already received an extension of time. I am reluctant to dismiss the Application, but in balancing all the factors, including the merits of the case and the prejudice to the parties, I am satisfied that the Application should be dismissed.

[12] Given the outcome, I make no order as to costs.

R. F. Goldstein J. Date: August 24, 2016