"SANOKR-MOSKVA" v. TRADEOIL MANAGEMENT, 2017 ONSC 1780

CITATION: "SANOKR-MOSKVA" v. TRADEOIL MANAGEMENT, 2017 ONSC 1780

COURT FILE NO.: CV-97-CU122206

MOTION HEARD: 20170126

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: "Sanokr-Moskva" LLC, Plaintiff

AND:

Tradeoil Management Inc., Defendant

BEFORE: Master B. McAfee

COUNSEL: F. Scott Turton, Counsel for the Moving Party, the Defendant Harvey S. Dorsey, Counsel for the Responding Party, the Plaintiff

HEARD: January 26, 2017

REASONS FOR DECISION

[1] This is the second motion for security for costs brought by the defendant. The first motion for security for costs was heard and determined by another Master on January 26, 2016. The Master dismissed the motion.

[2] The defendant appealed from the Master’s order. The appeal was heard and decided on May 31, 2016. The presiding Judge determined that, unknown to Master who heard the first motion for security for costs, the action was stayed in accordance with Rule 11.01 of the Rules of Civil Procedure at the time the first motion for security for costs was heard. The Judge presiding on the appeal found that the Master did not have jurisdiction to proceed with the first motion for security for costs in the circumstances. The Master’s order was set aside. The defendant was permitted to bring a second motion for security for costs.

[3] The application of Rule 56.01 involves a two-step analysis. The first step of the analysis requires the defendant to establish that it appears that the plaintiff falls into one of the categories set forth at Rule 56.01(a) to (f). If the defendant discharges this onus and establishes that it appears that the plaintiff falls into one of the categories, the second step of the analysis requires the plaintiff to establish that it would be unjust to require posting of security for costs (Shuter v. Toronto Dominion Bank, 2007 CanLII 37475 (ON SC), 2007 CarswellOnt 5732 (Ont. Master) at para 60).

[4] The defendant relies on Rule 56(1)(a) and (d). There is no issue that the plaintiff is a corporation incorporated pursuant to the laws of the Russian Federation and has its head office in the City of Moscow in the Russian Federation (see para 2 of the fresh as amended statement of claim). The defendant conducted a search through the Terraview system indicating that no real estate in the name of the plaintiff is located in Toronto, York, Simcoe, Dufferin, Peel, Halton, Hamilton-Wentworth, Waterloo or Middlesex counties. The defendant was unable to locate an address, place of business or phone number for the plaintiff in Ontario. The plaintiff does not take issue that the first part of the test has been satisfied. I am satisfied that it appears that the provisions of Rule 56.01(1)(a) and (d) have been satisfied.

[5] The onus now shifts to the plaintiff to satisfy the court that an order for security for costs would be unjust. In the second step of the analysis the court examines all factors it considers relevant or important in determining whether it would be unjust to make the order, including the financial circumstances of the plaintiff, the merits of the claim and whether the proposed order will prevent a bona fide claim from proceeding (see Shuter at paras 63-68).

[6] The plaintiff argues that a motion for security for costs would be unjust due to the defendant’s delay in bringing the motion and the defendant’s strategic purposes for bringing the motion. The plaintiff also argues that the plaintiff has a good chance of success in the action. The plaintiff also argues that the status of the defendant as a dissolved corporation is a significant factor that weighs against an order for security for costs.

[7] As set out in the reasons on the original motion for security for costs, although the action is approximately 20 years old, the defendant, in accordance with Rule 56.03(1), is only permitted to bring a motion for security for costs after the delivery of a defence. As a result of the history of the motion to set aside default judgment, including a 5 day trial of the issue and appeal, motion for consolidation, motions for leave to amend the statement of claim and appeal, the defendant did not deliver a statement of defence until on or about October 6, 2014. The original motion for security for costs was brought after a defence was delivered in accordance with Rule 56.03(1).

[8] Although, as argued by the plaintiff, the defendant did not request security for costs as a term of the summary judgment motion proceeding, the timing of the motion for security for costs was permitted by the Judge presiding in Civil Practice Court on December 10, 2015.

[9] The plaintiff did not take the position that there is prejudice as a result of the timing of this motion. The current plaintiff only came into existence in February of 2015.

[10] In these circumstances, I am not satisfied that the defendant has delayed in bringing this motion. Nor do these circumstances satisfy me that that this motion is a strategic motion brought only in response to the summary judgment motion.

[11] The degree of scrutiny given to the merits of the claim depends on the circumstances of the case. Where the plaintiff is impecunious, the threshold is low, requiring only a demonstration that the claim is not plainly devoid of merit. Where impecuniosity has not been shown, a closer scrutiny of the merits is warranted, requiring a demonstration that the claim has a good chance of success or a real possibility of success.

[12] The plaintiff does not submit that it is impecunious nor does the plaintiff submit that it has sufficient exigible assets. The plaintiff submits that it satisfies the higher threshold of demonstrating that the plaintiff has a good chance of success.

[13] On the original motion for security for costs, the defendant did not put on the record what defences it intends to raise to the enforcement of the foreign arbitration award or any evidence in support of its defences. The Master found that on the evidence before him on the original motion for security for costs the plaintiff has a good chance of success. The defendant has now put evidence of its defences before the court on the within motion.

[14] On a motion for security for costs, the court does not engage in a summary judgment analysis, particularly when there is a summary judgment motion pending. If the case is complex or turns on issues of credibility, it is generally not appropriate to make an assessment of the merits at this stage.

[15] In my view this is a complex action involving many issues including issues relating to the fuel oil testing, the appropriate parties to the arbitration and the forum of the arbitration. The motion to set aside default judgment resulted in a 5 day trial of an issue. The merits of this action are addressed in 12 affidavits filed on this motion (Kotov affidavits sworn October 26, 2000 and March 7, 2016, Professor Maggs affidavits sworn February 25, 2005 and June 28, 2016, Move (the late) affidavit sworn May 4, 2001, Kildeev affidavit sworn March 20, 2001, Vinnikova affidavits sworn March 20, 2001, December 7, 2015, September 16, 2016 and November 9, 2016, Turton affidavit affirmed July 15, 2016 and Seden affidavit sworn January 13, 2017). Relevant documentation is still in the process of being produced (see Seden affidavit sworn January 13, 2017). There are issues with the English translation of some of the material before me (see Seden affidavit sworn January 13, 2017). Success or failure in this action do not appear obvious. In these circumstances, I agree with the defendant’s submission that the merits are a neutral factor on this motion.

[16] The defendant is a dissolved corporation. In light of the decision of the Court of Appeal in Sickinger v. Krek, 2016 ONCA 459, released after the original motion for security for costs, the plaintiff is no longer relying on its original position that the defendant has no standing to proceed with this motion. The plaintiff does argue that it is illogical to award costs to a dissolved corporation. The plaintiff also argues that any costs ordered would be forfeited to the Crown in accordance with section 244 of the Business Corporations Act, R.S.O. 1990, c.B.16 (the Act).

[17] The defendant has retained counsel and has incurred costs in defending this proceeding. The defendant has been awarded costs in this proceeding by various Judges and Masters. Section 244 of the Act refers to property not disposed of at the date of dissolution. I am not satisfied that a costs award made after dissolution would be such property within the meaning of section 244 of the Act. I was not referred to any case law in this regard. I was also not referred to any decision where the financial circumstances of a defendant was a relevant factor on a motion for security for costs. I am not satisfied that that the status of the defendant of a dissolved corporation weighs against an order for security for costs. In my view, in the circumstances of this matter, the defendant’s status of a dissolved corporation is not a relevant factor.

[18] I was not referred to any evidence that a bona fide claim would be prevented from proceeding if an order for security for costs is granted.

[19] The plaintiff has not satisfied me that it would be unjust to order security for costs.

[20] With respect to the quantum of security and timing of security, in my view it is just to order security for costs by way of installment and only to and including the motion for summary judgment at this time. If the summary judgment motion is granted, the action will be at an end. If the summary judgment motion is not entirely successful, it may result in narrowing of issues. In accordance with Rule 56.07, the defendant may return to court to seek increased security for costs following the motion for summary judgment.

[21] Most of the costs incurred to date relate to the motion to set aside default judgment which proceeded by way of a 5 day trial of an issue in 2009 and 2010. The presiding Judge stated that if the parties were unable to agree on costs, arrangements could be made with Her Honour’s assistant to speak to costs. In the 7 years that followed, no attempt has been made by either party to seek these costs. I decline to include an amount for these costs in the circumstances.

[22] In my view a fair and reasonable amount to require the plaintiff to post for security for costs up to and including the motion for security for costs is the all-inclusive amount of $25,000.00. Of this amount, $3,500.00 is for the costs incurred relating to pleadings and $21,500.00 is allocated to the pending security for costs motion. The sum of $3,500.00 shall be posted within 45 days of today’s date and the further sum of $21,500.00 shall be posted within 45 days after the scheduling of the summary judgment motion.

[23] The parties agreed that the successful party on the motion would be entitled to costs of the motion in the amount of $5,000.00 payable within 30 days. The defendant was successful. The plaintiff shall pay to the defendant costs of this motion in the all-inclusive amount of $5,000.00 payable within 30 days.

[24] Order to go as follows:

1. The plaintiff shall post security for the costs of the defendant in the amount of $25,000.00, payable as follows:

a. the sum of $3,500.00 within 45 days of today’s date;

b. the further sum of $21,500.00 within 45 days after the scheduling of the summary judgment motion;

2. The amount in paragraph 1 shall be posted by way of cash or irrevocable stand-by letter of credit from a Canadian chartered bank in a form approved by the defendant or the court; and

3. Costs of the motion are fixed in the all-inclusive amount of $5,000.00 payable by the plaintiff to the defendant within 30 days.

Master B. McAfee

Date: March 20, 2017