Court File and Parties

COURT FILE NO.: CV-14-515076

MOTION HEARD: September 8, 2016

SUPERIOR COURT OF JUSTICE – ONTARIO

Re:

QUEENSCORP (ATWATER) LTD., Plaintiff

v.

WINDCATCHER (ATWATER) LTD., RODNEY MALE, and WINDCATCHER DEVELOPMENT CORPORATION, Defendants

BEFORE: Master Lou Ann M. Pope

APPEARANCES: David Lipkus, Kestenberg Siegal Lipkus LLP, for plaintiff Fax: 416-597-6567

Mervyn D. Abramowitz, Kronis, Rotsztain, Margles, Cappel LLP, for defendants Fax: 416-306-9874

REASONS FOR ENDORSEMENT

[1] This matter came back before me as a result of the defendants’ appeal of my decision dated March 31, 2016. In that decision, I dismissed the defendants’ motion for security for costs.

[2] Justice Matheson heard the appeal and in her decision dated August 4, 2016 she held that I erred in law in failing to consider the quality of the only asset of the plaintiff being the deposit monies of $100,000 held at the time and currently by the defendants. Matheson J. found that the plaintiff made no agreement that the deposit would remain in Ontario after being returned once this motion was finally disposed of. She held further that I ought to have considered the reality that cash can be transferred out of Ontario in a matter of minutes. In arriving at her findings, she considered the cases of Galileo Canada v. Asian Travel, 2005 CanLII 51352 (Ont. Master), at paragraph 9, and 671122 Ontario Limited v. Canadian Tire, 1993 CanLII 8606 (ON CA), [1993] O.J. No. 2173 (C.A.), at paragraph 2.

[3] In the end, Matheson J. granted the defendants’ appeal and directed that the motion be returned to me for further consideration bearing in mind her decision.

[4] I concur completely with the findings and conclusions of Matheson J.

[5] Rightly or wrongly, my decision to dismiss the defendants’ security for costs motion was made on the understanding of the facts that the defendants would not return the deposit monies to the plaintiff because the parties had not come to an agreement on who was responsible to pay an invoice of some $5,000 and until there was an agreement, the defendants would continue to hold the deposit.

[6] It appears from Matheson J.’s reasons that she understood the facts to be that the defendants intended to return the deposit monies to the plaintiff once there was a disposition of the motion.

[7] After hearing further submissions by counsel, I now understand the facts to be that the defendants intended to return the deposit monies to the plaintiff; however, they seek a term of the order, a holdback of sorts, of some $5,000 pending determination of the issue as to responsibility for payment of that invoice.

[8] The plaintiff submits that the deposit monies that belong to the plaintiff cannot be of any higher quality as the monies are in the control of the defendants being held in their lawyer’s trust account. Thus, the plaintiff has no control over the asset and cannot transfer the monies out of Ontario. The plaintiff submits further that the defendants have been holding the monies for some two years without court order having acknowledged that it belongs to the plaintiff.

[9] The defendants point to evidence in the motion material regarding the conduct of the plaintiff on October 28, 2014 and October 29, 2014 where the plaintiff acted contradictory with respect to the deposit monies. (Affidavit of R. Male at Exhibit “N”, and the statement of claim at Tab 3). Essentially, the defendants submit that on October 28, 2014, the plaintiff took the position that it was entitled to return of the deposit monies because the contract was at an end. The defendants agreed to return the monies. However, the next day on October 29, 2014, the plaintiffs issued the statement of claim in which it sought specific performance of the contract, in other words, that the contract was still in force and effect, whereby it did not seek return of the deposit monies. Simply put, the defendants state that on October 29, 2014, the plaintiff changed positions thereby it did not seek to have the monies returned. Therefore, given the contrary positions demonstrated by the plaintiff, the defendants say they had no choice but to retain the deposit monies. I accept this position given the evidence.

[10] The defendants now state (and apparently it was their position when the motion was heard by me originally) that they are willing to return the deposit monies to the plaintiff as they do not wish to continue to hold the monies.

[11] Based on the above understanding of the facts, with respect, I disagree with the plaintiff’s position that there is one of two assumptions I must make for the defendants to succeed. The first assumption is that if security for costs is ordered, the defendants will return the deposit. The second assumption is that if the deposit is returned to the plaintiff and because it is cash, the plaintiff will deal with the money adversely to the disadvantage of the defendants. Thus, the plaintiffs submit that there is no such evidence to support that assumption.

[12] In my view, if an order is made for security for costs, I would not have to assume that the defendants will return the deposit, rather, the defendants would be bound by my order to do so, such that the court would assume that the defendants would abide by the order.

[13] Secondly, regarding the second assumption, in my view, the court would not require evidence from the plaintiffs as to how it would deal with the money. In my view, on a security for costs motion, a court has discretion to consider the quality of an asset in the hands of a party. Furthermore, the plaintiff was at liberty to tender such evidence in the event security was ordered and elected not to do so.

[14] At paragraph 65 of my Reasons For Endorsement dated February 4, 2016, I found that the plaintiff had sufficient assets in Ontario to pay a costs order up to the completion of all steps including trial preparation; but, as the plaintiff’s only asset to satisfy a costs order was being held by the defendants, it was just in those circumstances that there be no order for security for costs.

[15] However, for the above reasons, I am now prepared to order that the defendants return the deposit monies to the plaintiff. Therefore, once the monies are returned to the plaintiff, it will be required to pay security for costs as the monies will now be in the plaintiff’s possession. As such, I am required to consider the quality of the asset in the plaintiff’s hands. Once returned, the plaintiff will have possession of some $95,000 cash. Based on my earlier findings, this asset is the plaintiff’s sole asset which was likely paid by one of the Queenscorp companies. Therefore, given those earlier findings, I now find that it is more likely than not that the deposit monies will be returned to the Queenscorp company that issued the cheque for payment of the deposit, as it was also my earlier finding that the plaintiff was incorporated for the sole purpose of developing the subject residential condominium project. Therefore, if that were to happen, the plaintiff would have no asset with which to pay a costs award.

[16] For the above reasons, the plaintiff shall be required to pay security for costs and the defendants shall return the deposit monies to the plaintiff, with the exception of $5,000 (or in the exact amount of the subject invoice) which defence counsel shall hold in trust pending resolution of this action or judgment.

[17] Generally the courts follow the principle of “pay as you go” with security for costs orders. Regarding the scale of costs, I am not prepared to order substantial indemnity costs as there is no evidence to support costs on that higher scale. I am very concerned that if I order security for costs based up to, for example, completion of examinations for discovery, the balance of the monies in the plaintiff’s hands will be dissipated or otherwise transferred out of the plaintiff’s hands leaving no monies to pay the second installment of security for costs if the matter proceeds beyond discoveries. If the plaintiff did so, it would obviously be to their detriment; however, the court’s concern is with respect to there being sufficient monies in order for the plaintiffs to pay a costs order at trial.

[18] Therefore, I order that the plaintiff pay security for costs of this action in the amount of $65,000, payable immediately upon receipt of the deposit monies from the defendants. That sum includes all steps to and including trial preparation. This sum shall be paid into court to the credit of this action.

[19] In addition, the plaintiff shall pay the defendants’ partial indemnity costs of the security for costs motion, and preparation and attendance on September 8, 2016 fixed in the amount of $17,000, payable forthwith upon receipt by the plaintiff of the deposit monies. This sum includes the defendants’ partial indemnity costs of the cross-examination by the plaintiff of Mr. Male pursuant to rule 39.02(4)(b).

(original signed)______

September 22, 2016 Master Lou Ann M. Pope