Queenscorp (Atwater) Ltd. v. Windcatcher (Atwater) Ltd.

COURT FILE NO.: CV-14-515076

MOTION HEARD: September 28, 2015

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: Michael R. Kestenberg, 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] The issues to be determined on this motion are whether the defendants are entitled to costs of the plaintiff’s abandoned motion for a certificate of pending litigation, and whether the plaintiff is required to post security for costs.

[2] The defendants consent to an order amending the plaintiff’s name in the title to proceedings from Queenscorp (Atwater) Ltd. to Queenscorp (Atwater) Inc.

Background

[3] This action arises out of an agreement regarding the purchase of land which was being developed by the defendants as a 110 to 134 unit residential condominium. The plaintiff, Queenscorp (Atwater) Inc. (“Queenscorp”), agreed to purchase the defendant, Windcatcher (Atwater) Ltd.’s (“Windcatcher”) interest in the said property located on Atwater and Cawartha roads in Mississauga, Ontario, including Windcatcher’s interest in 42 agreements of purchase and sale for pre-sold condominium units (“condo purchase agreements”). The agreement of purchase and sale between the parties contained several conditions for the benefit Queenscorp regarding the early termination provisions contained in the condo purchase agreements. Those provisions permitted Windcatcher to terminate the condo purchase agreements at a future date in the event that certain pre-sale targets were not achieved or if Windcatcher was not able to obtain financing for the construction of the condominium building. Queenscorp wanted to ensure that the date of satisfaction for the early termination conditions were sufficiently extended into the future, after the closing date, so that its pre-sale targets could be achieved and financing obtained without being liable for damages to the condominium purchasers if the condominium development was not pursued. Essentially, Queenscorp was stepping into the shoes of Windcatcher with respect to the condo purchase agreements. Therefore, the agreement of purchase and sale contained representations and warranties given by Windcatcher relative to those condo purchase agreements.

[4] The agreement of purchase and sale contained numerous conditions, one of which was Queenscorp’s right to terminate the agreement prior to closing if Windcatcher was not able to provide unwaived early termination conditions in the condo purchase agreements. Given the impending expiry of some of the early termination conditions and the fact that Windcatcher had not obtained the consent of the condominium purchasers to extend the satisfaction date of the early termination provisions, the parties agreed on two occasions to extend the date for Queenscorp’s conditions to be satisfied. However, Queenscorp’s evidence is that in late September 2014, Windcatcher terminated all the condo purchase agreements by serving notices to the condominium purchasers and suspending all future sales of the project. Ultimately Queenscorp did not waive its conditions by the deadline in late September 2014, which resulted in the agreement coming to an end.

[5] Subsequently, Queenscorp relied on provisions of the agreement for a full refund of its deposit monies of $100,000. There is evidence in the material filed of Windcatcher’s agreement to refund the deposit subject to an issue regarding payment of an invoice from the City of Mississauga for $4,475 for the cost to replace trees. To date, Windcatcher has not refunded the deposit and continues to hold these monies.

[6] After the agreement came to an end, Windcatcher listed the property for sale, with offers to be reviewed on December 15, 2014.

This Action

[7] This action was commenced on October 29, 2014. Queenscorp seeks various relief including a declaration that the agreement of purchase and sale is valid and in full force and effect, specific performance of the agreement, an abatement in the purchase price, a certificate of pending litigation, or in the alternative to specific performance and an abatement in the purchase price, damages for breach of contract, misrepresentation, breach of duty of good faith and unjust enrichment.

Whether Windcatcher is Entitled to Substantial Indemnity Costs of the Abandoned Motion for a Certificate of Pending Litigation (“CPL”)

[8] Queenscorp brought a motion on notice seeking a CPL in December 2014, which was returnable on March 25, 2015. According to Queenscorp, that date was the earliest date available for this motion in the court’s schedule. Plaintiff’s counsel had advised defence counsel of its intention to bring this motion before it was scheduled. The motion was served on the defendants effective December 18, 2014. Queenscorp’s factum states that it offered to withdraw the CPL motion on a without costs basis the morning of February 12, 2015, prior to receipt of the defendants’ responding material. That offer was not accepted and the defendants arranged to serve their responding material the afternoon of February 12, 2015. Their material responds to the CPL motion and includes a cross-motion seeking security for costs. Approximately five days after being served with the defendants’ material, Queenscorp withdrew the motion. Queenscorp acknowledges that it is required to compensate the defendants for having withdrawn its CPL motion; however, Queenscorp opposes the defendants’ request for substantial indemnity costs.

[9] Queenscorp’s position is that as the subject property had been sold, there was no reason to continue with the motion. The difficulty with this position is that there is no evidence on this motion that the property had been sold. The only evidence in this respect is from Rodney Male’s affidavit sworn February 11, 2015, at paragraph 127, as described in more detail below, that the property was sold in December 2014; however, due to Queenscorp’s interference, the new purchaser could not get financing for the project and was not in a position to purchase the property. Therefore, based on the evidence filed, as of February 11, 2015 when Mr. Male signed his affidavit, the subject property had not been sold.

[10] Queenscorp’s position is that it had an interest in the property based on its financial investment in the property which the defendants induced it to purchase. Queenscorp believed that the property was unique because of a lack of development land of the size that was available in the area, which it states was confirmed by the defendants in an email from defence counsel in September 2014. (Affidavit of Mark Bozzo, sworn December 16, 2014, Exhibit “D”, p. 116)

[11] In addition, Queenscorp submits that the defendants’ contention that it interfered with the sale of the property to a third party is unsupported hearsay evidence which is inadmissible. Rodney Male’s evidence, at paragraph 127 of his affidavit, is that he received emails from Windcatcher’s broker regarding Queenscorp’s interference with the new purchaser’s financial backers which caused the purchaser to withdraw from the deal. At Exhibit “U” to his affidavit is an email dated January 29, 2015 from Peter Powers, the purchaser’s agent, sent to David Hahn, Windcatcher’s agent, which substantiates Male’s statements.

[12] Subrule 39.01(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, permits an affidavit for use on a motion to contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit. In my view, Male’s evidence complies with that provision and is therefore admissible. Therefore, I find that there is evidence of Queenscorp’s interference with the sale of the subject property which took place prior to Queenscorp withdrawing its CPL motion. This, in my view, suggests that Queenscorp was attempting to thwart the sale of the property before the CPL motion on March 25, 2015.

[13] The defendants submit that the CPL motion has no merit for several reasons.

[14] Firstly, the defendants argue that Queenscorp acknowledged that the sale agreement had become null and void; therefore, it has no interest in the subject property.

[15] Secondly, Queenscorp was aware that specific performance was impossible because the agreement included an assignment to Queenscorp of Windcatcher’s interests in the condominium agreements, all of which had been terminated prior to October 1, 2014.

[16] Thirdly, the defendants contend that Queenscorp came to court with unclean hands having worked to prevent and interfere with an agreement to purchase the lands by a third party.

[17] As background, after the agreement between the parties came to an end, Queenscorp was aware that Windcatcher wanted to sell the property and, in fact, there were negotiations between the parties for Queenscorp to purchase the property alone. However, in late November 2014, after the parties were unable to reach an agreement, Windcatcher listed the property for sale on MLS. It was shortly thereafter that Queenscorp scheduled its CPL motion for March 25, 2015. Windcatcher was aware of Queenscorp’s intention to bring a CPL motion before it listed the property for sale having taken the position that because the agreement of purchase and sale was at an end, Windcatcher was free to deal with the property as it saw fit and it was unreasonable for it to have to wait some five months to deal with its property. Windcatcher submits that Queenscorp delayed bringing the CPL motion rather than bringing it before or shortly after it commenced the action on an urgent ex parte basis. It further submits that this was done in a calculated effort to exert pressure on Windcatcher to sell the property to Queenscorp at a discount and not to anyone else, with knowledge that it would likely be unsuccessful on its CPL motion and that if the motion were brought urgently and dismissed, Windcatcher would be free to proceed with a sale of the property. Also in support of its position, Windcatcher refers to a letter which Queenscorp sent to Windcatcher’s real estate broker one day before offers to purchase were to be accepted in December 2014 advising of this action and the pending CPL motion. Notwithstanding, Windcatcher sold the property a few days later to an unrelated party. Windcatcher argues that Queenscorp continued to pressure Windcatcher insisting on providing Queenscorp with the name of the new purchaser to put on notice of its CPL motion. Ultimately Windcatcher’s new purchaser was unable to obtain the financing to purchase the property therefore the purchase was not finalized. Windcatcher submits that this failed purchase was due to Queenscorp’s interference by contacting the new purchaser’s financial backers, who coincidentally do business with Queenscorp, and convincing them that they should not provide the financial backing for this deal.

[18] Lastly, Windcatcher contends that there is nothing unique about this property and damages would be an adequate remedy.

[19] Windcatcher seeks costs of the abandoned CPL motion on a substantial indemnity scale. It relies on rule 37.09(3), as follows:

Where a motion is abandoned or is deemed to have been abandoned, a responding party on whom the notice of motion was served is entitled to the costs of the motion forthwith, unless the court orders otherwise.

[20] The law with respect to substantial indemnity costs is as stated by the Court of Appeal in

Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, which is set out below.

[21] An award of costs is governed by s.131 of the Court of Justice Act, R.S.O. 1990, c. C.43, and by Rules 49 and 57.01. The general source of judicial discretion to award costs is found in s. 131 of the Courts of Justice Act as expanded by rule 57.01.

Section 131(1) states:

Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[22] Rule 57.01(1) sets out the factors that a court may consider in exercising its discretion under section 131 of the Courts of Justice Act to award costs in addition to the result of the proceeding and any offer to settle or to contribute made in writing.

[23] Rule 57.01(4) allows for elevated levels of costs, as follows:

Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,

(a) To award or refuse costs in respect of a particular issue or part of a proceeding;

(b) To award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding;

(c) To award all or part of the costs on a substantial indemnity basis;

(d) To award costs in an amount that represents full indemnity; or

(e) To award costs to a party acting in person.

[24] Substantial indemnity costs is defined in rule 1.03 as “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A”. The Court of Appeal stated that this part of Tariff A was once the prescribed grid for “partial indemnity costs”, but is no longer in effect. “Full indemnity costs” is not a defined term but is generally considered to be a complete reimbursement of all amounts a client has had to pay to his or her lawyer in relation to the litigation.

[25] Rule 49 deals with a specific aspect of costs which is not applicable to the facts herein.

[26] Thus, the court held that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10 where substantial indemnity costs are explicitly authorized. The second involves sanction-worthy behaviour by the losing party.

[27] With respect to sanction-worthy behaviour, in Conroy v. The College of Physicians and Surgeons of Ontario, 2011 ONSC 1664, at para. 8, the court held that a party may be entitled to substantial indemnify costs where a party makes an unproven allegation of fraud, bad faith or misconduct against another party or conducts itself improperly during the course of the litigation.

Analysis

[28] Queenscorp knew in the fall of 2014 that the agreement of purchase and sale had come to an end when it did not waive its conditions. Queenscorp requested a refund of its deposit of $100,000 pursuant to the terms of the agreement. Windcatcher agreed to refund the deposit; however, there was a minor issue with respect an invoice and who should be responsible to pay it. Windcatcher did not refund the deposit and acknowledges that it continues to hold the deposit in trust. Queenscorp knew that Windcatcher wanted to sell the property and, in fact, negotiated with Windcatcher to purchase the land only. Those negotiations were not successful and ultimately Windcatcher listed the property for sale. Queenscorp knew that the property was listed for sale in December 2014 when it scheduled its CPL motion. Therefore, it is my view that if Queenscorp was serious about obtaining a CPL, or thought that it would be able to prove that it had an interest in the property, it would have brought the CPL motion on an exparte basis. Queenscorp chose to wait some three months until the return of the motion on March 25, 2015 to deal with the CPL and, in the meantime, interfered with Windcatcher’s sale of the property, in my view, to thwart the sale. Its motive was either to force Windcatcher to sell the property to Queenscorp or to delay the new sale until after the CPL motion in the hopes that it would be successful in obtaining a CPL. In other words, I find that Queenscorp had an ulterior motive to bringing the CPL motion. Ultimately, Queenscorp abandoned its CPL motion when Windcatcher had already drafted its responding material and on the eve of serving it. Essentially Queenscorp forced Windcatcher to respond to the CPL motion with no valid reason for abandoning its motion because there is no evidence that title to the property had been transferred to a new owner at the time it abandoned the motion in early February 2015.

[29] For those reasons, I find that Windcatcher is entitled to substantial indemnity costs of the CPL motion.

[30] Windcatcher filed a Costs Outline for time spent on both motions. It seeks substantial indemnity costs for the abandoned CPL motion. The total amount sought for both motions on a substantial indemnity basis is $22,015.37 inclusive of fees and disbursements. Windcatcher filed a cross-motion record, factum and brief of authorities. Approximately one half of the factum addresses the issue of costs for the CPL motion. Three cases were filed on this issue. Three lawyers and one clerk worked on the responding material.

[31] Windcatcher submits that in preparing the responding motion record approximately 75 per cent of the time spent was for the CPL motion and 25 per cent for the security for costs motion, and the opposite for the time spent in preparing the factum. Queenscorp submits that the majority of the time to prepare Windcatcher’s material was spent on the security for costs motion.

[32] Queenscorp motion record is lengthy with some 400 pages including a 21-page affidavit and 15 exhibits. Windcatcher’s cross-motion record is also lengthy with 195 pages including a 36-page affidavit and 48 exhibits. Queenscorp conducted a cross-examination of Mr. Male on his affidavit in relation to the security for costs motion.

[33] The affidavit of Rodney Male filed by Windcatcher addressed both a response to the CPL motion and security for costs. In my view, the majority of the affidavit responds to Queenscorp’s allegations contained in the affidavit of Mark Bozzo. In fact, on page 34 of the 36-page affidavit, Rodney Male concludes his evidence regarding the CPL motion by stating that a CPL was not appropriate. However, in stating his evidence in support of security for costs, Mr. Male states the following at paragraph 138: “As noted above, the Plaintiff is a shell corporation that likely has no assets to satisfy any costs awards made against it.” (my emphasis) Therefore, it is reasonable to conclude that a portion of his evidence at pages 1 through 34 would have formed his evidence on the motion for security for costs. However, I am cognizant of the fact that the majority of Mr. Male’s affidavit and the exhibits were included to vigorously oppose the CPL motion given that Windcatcher had taken active steps to sell the property and knowing that if a CPL were granted, it would likely prevent any sale.

[34] I conclude that the time spent by Windcatcher’s counsel to prepare for the motions was divided approximately evenly.

[35] Windcatcher’s Costs Outline sets out that the time spent was 77 hours by three lawyers and one law clerk. No time dockets or a client ledger were included in the costs outline to support the hours spent.

[36] I accept that it was of utmost importance to Windcatcher to oppose the CPL motion. In addition, in reaching my decision on the quantum of costs, I have considered that Queenscorp had an ulterior motion to bringing the CPL motion for reasons set out above. I have also considered the lengthy background facts that were necessary to include in the material in order for the court to fully understand the issues in the action and the motions.

[37] For those reasons, Windcatcher’s substantial indemnity costs of the CPL motion are fixed in the amount of $6,500 inclusive of fess, taxes and disbursements payable within 45 days of the date of this order.

Motion For Security For Costs

[38] Windcatcher relies on subrules 56.01(1)(d) and (e) of the Rules which provide as follows:

56.01(1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.

[39] The decision to order security for costs is discretionary and the court considering the motion is afforded broad latitude to make an order that is just in the circumstances. (Morton v. Canada (Attorney General) (2005), 2005 CanLII 6052 (ON SC), 75 O.R. (3d) 63 at para. 38 (S.C.J.))

[40] The courts have established a two-step inquiry when considering whether to order security for costs.

[41] Initially, the onus is on the defendant to demonstrate that the plaintiff falls into one of the subrules of 56.01(1). The onus is not a heavy one. For example, the defendant need only demonstrate that “it appears” that the plaintiff is a corporation and there is “good reason to believe” that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant. Only if the defendant succeeds with the first stage does the inquiry move to the second stage.

[42] At the first stage, the defendant in satisfying its onus that there is a good reason to believe the corporate plaintiff has insufficient assets to satisfy a cost award must provide enough information about the corporation that goes beyond mere conjecture, hunch or speculation. There must be some evidence placed before the court from which the court can accept that the concern is genuine and that it is based on proven facts regarding the corporation’s current financial circumstances. (Cigar500.com Inc. v. Ashton Distributors Inc. et al., 2009 CanLII 46451 (ON SC), paras. 23-24)

[43] The authorities are clear that the second step onus on the plaintiff is not even reached until the defendant satisfies its initial burden. Once the defendant has done so, the onus shifts to the plaintiff.

[44] At the second stage the onus shifts to the plaintiff. The plaintiff can either demonstrate that it has sufficient assets in Ontario to pay a costs order or that it is impecunious and then ask the court to make such order as is just in the circumstances. With respect to subrule 56.01(1)(e), the plaintiff can either demonstrate that it has sufficient assets in Ontario to pay a costs order or that it is impecunious, and it must also demonstrate that the action is not frivolous and vexatious.

[45] At the second stage, the merits of the case remain a relevant factor. If it is found that the plaintiff has insufficient assets in Ontario, the court may exercise discretion as to whether an order for security for costs would be “just” in all of the circumstances. An inquiry into all factors must be taken including the merits of the case, balancing the interests of the parties, review of the financial circumstances of the plaintiff and the effect of an order.

Evidence of the Parties

[46] Rodney Dale’s (“Dale”) evidence is that Queenscorp is a shell corporation and likely has no assets to satisfy any costs award. It is submitted that Queenscorp was formed for the sole purpose of purchasing the subject property. He further states that Queenscorp is one of the single purpose entities that form part of the Queenscorp Group, and from the Queenscorp website and his dealings with Mark Bozzo (“Bozzo”) that one or more of the other entitles in the Queenscorp Group may have assets that could be posted as security for costs. Dale states that Bozzo is the principal, guiding and operating mind of Queenscorp such that he could provide Queenscorp with funds to post security for costs.

[47] Queenscorp’s corporation profile report from the Ministry of Government Services obtained on January 22, 2015, sets out that its status as a corporation is active. Mark Bozzo is listed as the director, president and secretary since 2006. Articles of Amendment were filed on July 24, 2014.

[48] The printout from the website entitled “Queenscorp Group” states that it offers a wide range of commercial services including commercial and retail development, general contracting and construction management, real estate consultation and property management. It further refers to “Queenscorp Group of Companies” that was founded in 1992. There is no direct evidence on this website that the plaintiff herein is one of the Queenscorp Group of Companies; however, it is not disputed by Queenscorp.

[49] Paragraph 2 of the statement of claim states that Queenscorp is an Ontario corporation with an office located in Toronto. It was formerly known as 1712648 Ontario Limited. The defendants allege in paragraph 7 of the statement of defence that Queenscorp’s principal is a sophisticated individual with extensive experience in developing large real estate projects, including large, multi-unit, residential condominium projects.

[50] The following facts are undisputed: (1) Queenscorp paid Windcatcher a deposit of $100,000 when the agreement of purchase and sale for the subject property was accepted, (2) Windcatcher agreed to return the deposit monies to Queenscorp subject to resolution of an issue as to what party was responsible to pay an invoice to the municipality, and (3) Windcatcher has not returned the deposit monies and continues to hold those monies.

[51] The named payor on the cheque stub for the deposit is 1712648 Ontario Limited, Queenscorp’s predeceasor.

[52] Queenscorp submits that it is disingenuous for Windcatcher to assert that Queenscorp has no assets in light of the fact that it is currently in possession of the deposit monies, the value of which would cover over 90 per cent of Windcatcher’s anticipated costs on a partial indemnity scale through trial.

Analysis

[53] The fact that the name of the plaintiff is Queenscorp (Atwater) Ltd. may lead one to conclude that the company was formed for a single purpose to purchase the subject property of this proceeding which is located on Atwater road in Mississauga.

[54] Queenscorp’s evidence is that it invested a significant amount of money in the development of the property after the agreement of purchase and sale was signed. Included in Queenscorp’s evidence are copies of invoices for monies it allegedly paid, for example, for permits, architect fees, structural engineer fees, survey fees, and site clearing/clean up fees. However, many of the invoices or receipts are addressed to other companies such as the Bell invoices to Queens Corp Group, a cheque stub from Marcan Capital Inc. with address of 2 Queen Elizabeth Boulevard, Toronto, which is the same address as the registered head office of the plaintiff (see Corporation Profile Report for Queenscorp at Exhibit “A” to Male’s affidavit). At page 223 of Queenscorp’s motion record, there is an employee expense report of Queenscorp Construction Inc., which is clearly not the same company as the plaintiff herein. The accounts from Joseph N. Campitelli, at pages 226-228 and 230-233 of Queenscorp’s motion record, are addressed to Queenscorp Group. The invoice from MSAi is addressed to Queenscorp Group.

[55] Having considered the evidence and for the above reasons, in my view, it is likely that Queenscorp was formed for a single purpose to purchase and develop the subject property. Further, I am of the view that there is ample evidence that points to Queenscorp being one of several companies that form the Queenscorp group of companies. Therefore, it is more likely than not that the deposit monies came from one of the other Queenscorp group of companies despite the cheque stub for the deposit showing the payor as 1712648 Ontario Limited, Queenscorp’s predeceasor. Thus, I find that there is good reason to believe that Queenscorp has insufficient assets in Ontario to pay the costs of the defendant.

[56] Given my above finding, Windcatcher has met its onus with respect to subrule 56.01(1)(d). I intend to deal with subrules (d) and (e) separately.

Rule 56.01(1)(d)

[57] The onus shifts to Queenscorp to either demonstrate that it has sufficient assets in Ontario to pay a costs order or that it is impecunious.

[58] Queenscorp does not take the position that it is impecunious. The only evidence adduced by Queenscorp regarding its assets is the deposit money of $100,000 paid to Windcatcher which Windcatcher continues to hold. Queenscorp submits that those monies belong to the plaintiff based on the evidence filed herein.

[59] From my review of the evidence filed herein and a review of the statement of defence, in particular paragraphs 52 to 55 relating to the deposit monies, in my view, it is likely that notwithstanding the results at trial, the deposit will be ordered to be returned to Queenscorp. Thus, I accept that approximately $95,000 to $100,000 currently being held by Windcatcher’s counsel is the property of Queenscorp and available to pay a costs award.

[60] Therefore, given my above finding, the issue is whether Queenscorp has met its onus of satisfying the court that it has insufficient assets to pay a costs order. In other words, is $95,000 to $100,000 sufficient to pay a costs order.

[61] As set out at paragraph 71 of its factum, Windcatcher is agreeable to treating the deposit as security for costs and having it continue to be held by Windcatcher’s solicitor. However, to the extent that any amounts ordered to be posted as security exceed the amount of the deposit, Windcatcher submits that additional security should be posted by Queenscorp.

[62] Windcatcher’s draft bill of costs sets out that based on its actual fees and HST up to the completion of the pleadings stage, partial indemnity costs are estimated in the amount of $12,220.95. The bill of costs also contains estimated fees for the CPL motion and this motion, and the balance of the steps up to trial. The total amount of estimated costs plus HST up to trial, excluding costs of the CPL and this motion, is $81,000 approximately plus disbursements of $21,000 approximately. The disbursements include anticipated and estimated costs of some $11,000 for witness expenses to attend trial, expert report on damages and witness fees for the expert to give testimony at trial.

[63] Queenscorp submits that based on Windcatcher’s bill of costs, approximately $34,000 is estimated as partial indemnity costs for the pleadings and discovery stages; therefore, there are sufficient assets to pay that portion of the estimated costs up to completion of the discovery stage.

[64] Both parties accept that it is common for a court to order security for costs on a pay-as-you-go basis particularly when the action is at an early stage where pleadings have been completed.

[65] For the above reasons, it is my view that Queenscorp has met its onus and has demonstrated that it has sufficient assets in Ontario to pay a costs order up to the completion of all steps including trial preparation. Therefore, it is my view that it is just in the circumstances that there be no order for security for costs.

[66] Should this action proceed to trial, Windcatcher has the right to bring another motion for security for costs of the trial.

Rule 56.01(1)(e)

[67] Windcatcher also relies on subrule 56.01(e) which provides that a court has discretion to order security for costs as is just where it appears 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 costs of the defendant.

[68] Given my finding above regarding sufficiency of assets, the remaining issue is whether Windcatcher has satisfied its onus of demonstrating that there is good reason to believe that this action is frivolous and vexatious.

[69] A frivolous action is one which, on its face, is so unreal that no reasonable or sensible person could bring it. A frivolous and vexatious pleading has been defined as one which is “hopeless factually”, and which is “plain and obvious . . . cannot succeed”. (876502 Ontario Inc. v. I.F. Propco Holdings (Ontario) 10 Ltd., 1997 CanLII 12196 (ON SC))

[70] The undisputed evidence is that the parties herein entered into a legal and binding agreement for the purchase and sale of property that was being developed into a residential condominium property. The agreement contained representations, warranties and an indemnity to be provided by Windcatcher on closing, all relating to existing condominium purchase agreements. Among other allegations, Queenscorp alleges that Windcatcher breached its duty of good faith in the performance of the contract by repudiating section 7.04 of the agreement during the conditional period. Queenscorp relies on Bhasin v. Hrynew, 2014 SCC 71, for the proposition that the Supreme Court of Canada recently confirmed that a duty of good faith exists in the performance of contracts.

[71] This action is still at the pleadings stage; therefore, the only evidence that exists in order to make a determination as to whether the action is frivolous and vexatious are the pleadings and the evidence filed on this motion.

[72] Based on the evidence, I concur with Queenscorp’s position and find that there is a triable issue as to the extent of Windcatcher’s duty of good faith and whether or not their refusal to provide Queenscorp with unwaived condominium purchase agreements on closing and within 18 months following closing is in direct breach of their representations and warranties contained in the agreement.

[73] In my view, there is adequate evidence to support Queenscorp’s allegations of breach of contract, misrepresentation, breach of duty of good faith and unjust enrichment to reach a conclusion that this action has merit and is not frivolous and vexatious.

[74] For those reasons, I find that Windcatcher has not met its onus of demonstrating that there is good reason to believe that this action is frivolous and vexatious. As such, the enquiry ends there and the onus does not shift to Queenscorp.

Conclusion on Motion for Security for Costs

[75] Queenscorp was successful in satisfying its onus under subrule 56.01(1)(d) that it has sufficient assets in Ontario to pay Windcatcher’s costs of the action up to and including preparation for trial. Further, Windcatcher was not successful in demonstrating that this action is frivolous and vexatious as required by subrule 56.01(1)(e). Therefore, Windcatcher’s motion for security for costs is dismissed.

[76] Queenscorp shall be entitled to its costs of the motion for security for costs on a partial indemnity basis. The costs outlines do not include time dockets or client ledgers to support the hours spent. Queenscorp filed a supplementary responding factum which contained all the same material as in its original Factum with the addition of excerpts of the cross-examination of Mr. Male. It also filed the transcript of the cross-examination of Mr. Male. In my view the supplementary factum was not necessary; therefore, time spent to draft, serve and file it is not recoverable.

[77] There was significantly more time spent on the security for costs motion than the CPL motion including cross-examinations.

[78] I fix Queenscorp’s partial indemnity costs of the security for costs motion at $9,500 inclusive of fees, tax and disbursements, which are payable within 45 days of this order.

Summary

[79] The following orders are hereby made:

[80] Queenscorp shall pay Windcatcher’s costs of the plaintiff’s abandoned CPL motion, on a substantial indemnity basis; fixed in the amount of $6,500 inclusive of fees, taxes and disbursements, payable within 45 days of the date of this order.

[81] Windcatcher’s motion for security for costs is dismissed with costs to Queenscorp on a partial indemnity basis, fixed in the amount of $9,500 inclusive of fees, taxes and disbursements, payable within 45 days of the date of this order.

[82] On consent, leave is hereby granted to the plaintiff to amend its name in the statement of claim to Queenscorp (Atwater) Inc.

___(original signed)

February 4, 2016 Master Lou Ann M. Pope