Cissé and Droulin v Trylon TSF Inc., 2017 ONSC 4225

Court File and Parties

Court File No.: CV-16-563046 Date: 2017/07/07

Superior Court of Justice – Ontario

Re: Daouda Cissé and Olivier Droulin v. Trylon TSF Inc.

Before: Master Graham

Heard: June 12, 2017

Counsel: W. Fuhgeh, for the applicants A. Hirsh and V. Cotric, for the respondents (moving parties)

Reasons for Decision

(Motion for security for costs)

1On December 13, 2013, Daouda Cissé and Olivier Droulin (“the applicants”) obtained a judgment against the respondent Trylon TSF Inc. (“Trylon Canada”) and two related Trylon companies in a wrongful dismissal action in Senegal. On July 15, 2015, the applicants commenced this application to have the Senegal judgment recognized and enforced as a judgment of Ontario’s Superior Court of Justice.

2The respondent now moves for security for costs of the application under rule 56.01(1)(a) of the Rules of Civil Procedure:

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, (a) the plaintiff or applicant is ordinarily resident outside Ontario.

3The applicants acknowledge that they reside in Senegal. Accordingly, the court must consider whether the circumstances of the case are such that it should exercise its discretion to “make such order for security for costs as is just”.

4If the applicants can demonstrate impecuniosity, they can defeat this motion for security for costs provided that their claims are not clearly devoid of merit. This principle was stated in Zeitoun v. Economical Insurance Group (2008), 2008 ONSCDC 20996, 91 O.R. (3d) 131 (Div. Ct.), upheld at 96 O.R. (3d) 639 (C.A.):

49. Where impecuniosity is shown, the plaintiff needs only to demonstrate that the claim is not plainly devoid of merit. (See John Wink Ltd. v. Sico Inc. (1987), 1987 ONSC 4299, 57 O.R. (2d) 705 (H.C.J.) ). That is a very low evidentiary threshold.

5The quality of the evidence required to establish impecuniosity is described by Quinn J. in Morton v. Canada (Attorney General), 2005 ONSC 6052, [2005] O.J. No. 948, a case in which security was sought from plaintiffs residing in Pennsylvania (at paragraph 32):

32. In motions of this nature, the financial evidence of the plaintiffs must be set out with robust particularity. There should be no unanswered material questions, as is the case here. It is worth remembering that the financial status of the plaintiffs is known only to them. . . . Full financial disclosure is required and should include the following: the amount and source of all income; a description of all assets (including values); a list of all liabilities and other significant expenses; an indication of the extent of the ability of the plaintiffs to borrow funds; and, details of any assets disposed of or encumbered since the cause of action arose.

6If the applicants fail to demonstrate impecuniosity, in order to defeat the motion, they must demonstrate a stronger case than one simply “not plainly devoid of merit”. This principle is also set out in Zeitoun, supra (at paragraph 50):

50. Where impecuniosity has not been shown however, a closer scrutiny of the merits of the case is warranted; in those cases there is no compelling argument that there is a danger that poverty of the plaintiff will cause an injustice by impeding pursuit of a claim that otherwise would have been permitted to be tried. Where impecuniosity has not been shown, a legitimate factor in deciding whether or not it would be just to require security for costs is whether the claim has a good chance of success. [emphasis added]

7Trylon Canada relies on Bruno Appliance and Furniture Inc. v. Cassells Brock and Blackwell LLP, [2007] O.J. No. 4096, in which Master Glustein (as he then was), stated that in order for a plaintiff who cannot establish impecuniosity to defeat a security for costs motion, “the court must be satisfied that the merits in favour of at least partial success are overwhelming” [emphasis added]. The standard of an “overwhelming” case on the merits is higher than the “good chance of success” required by Zeitoun. As Zeitoun was decided by the Divisional Court in 2008, after Master Glustein’s 2007 decision in Bruno Appliance, I would apply the Zeitoun standard of “a good chance of success” to cases where impecuniosity is not demonstrated.

8In Padnos v. Luminart, 1996 ONSC 11781, [1996] O.J. No. 4549, Kitely J. considered the significance of the merits of a case in determining whether to make a security for costs order (at paragraph 4):

4. . . . Merits have a role in any application under r. 56.01, albeit in a continuum; for example, r. 56.01(1)(a) would be at the low end and r. 56.01(1)(e) would be at the high end.

9Based on Padnos, as this motion is brought under rule 56.01(1)(a), the merits would be a relatively minor consideration.

10As set out in more detail below, the applicants submit that their inability to post security resulted from the conduct of the defendants in the Senegal action, including the respondent Trylon Canada. In support of its argument that Trylon’s conduct contributed to its inability to pay costs, and therefore should preclude an order for security, the applicants rely on John Wink Ltd. v. Sico Inc. (1987), 1987 ONSC 4299, [1987] O.J. No. 5 (H.C.J.):

8. There can be no question that an injustice would result if a meritorious claim were prevented from reaching trial because of the poverty of a plaintiff. If the consequence of an order for costs would be to destroy such a claim no order should be made. Injustice would be even more manifest if the impoverishment of plaintiff were caused by the very acts of which plaintiff complains in the action. [emphasis added]

Issues on the motion

11The issues on the motion are:

1. Can the applicants demonstrate that they are impecunious, such that they need only show that their claims are not clearly devoid of merit.
2. If the applicants cannot establish that they are impecunious, can they demonstrate that their application has a good chance of success?
3. Is the document (“Engagement valant caution”) signed by the applicant Cissé purporting to provide Trylon Canada with a security interest in his house in Senegal a sufficient substitute for posting security in Ontario?
4. Was there conduct on the part of Trylon Canada that contributed to the applicant’s financial circumstances such that it would be unjust to order that the applicants post security?
5. If security is to be ordered, what is the appropriate quantum?

Have the applicants demonstrated impecuniosity?

12The evidence of the applicants Cissé and Droulin with respect to their financial circumstances is contained in their affidavits both sworn August 5, 2016. The content of their affidavits is identical except as specifically indicated below. Their evidence is as follows:

1. They invested all that they had in the Trylon project in Senegal and subsequent to the termination of their employment, their financial security and way of life were destroyed. They are assisted by friends and family but their family members have their own problems and they can only provide them with basic necessities.
2. Subsequent to August, 2015, they have no longer had a salary and they had to terminate their own employees because they had no funds to pay them.
3. As a result of their termination by Trylon, they cannot borrow money and they have no one who could guarantee a loan on their behalf. They are essentially insolvent.
4. Their lifestyle will not return to normal until their Senegal judgment is recognized in Ontario and they are able to execute the judgment against Trylon Canada.
5. They have provided the financial statement for their business CDMA Services for 2015 which shows a loss of approximately 23.3 Million Central African Francs (CFA). (At an exchange rate agreed to by counsel of approximately 435 CFA to $1 CAD, this is about $52,000.) They have also provided a copy of a demand letter dated January 26, 2016 from “Total Senegal”, which appears to be an energy provider, reflecting approximately 2 Million CFA ($4,597 CAD) owing by their company CDMA Services.
6. They have provided Mr. Cissé’s bank statement for February 29, 2016 showing a balance of 55.8 CFA and Mr. Droulin’s bank statement for May 31, 2016 for 6,352 CFA (approximately $14 CAD).
7. Mr. Cissé owns a house in Senegal with an appraised value, as of July 13, 2016, of 106,913,110 CFA (approximately $235,000 CAD). He has offered to provide his house as security for costs by way of registering a security interest of $30,000 CAD in favour of Trylon TSF Inc., which would allow his house to be sold in the event of a costs award favourable to it.

13The applicants have also provided evidence with respect to their financial circumstances by way of affidavits from Saer Diakhate, the brother of the applicant Cissé, and Latyr Mamadou Senghor, a friend of the applicant Droulin.

14Mr. Diakhate’s evidence is that from the beginning of Daouda Cissé’s dispute with Trylon, his financial position has been extremely precarious. He has on various occasions put his house up for sale to support his family. Unfortunately, he cannot solve his brother’s financial problems but he does not hesitate to help when possible, by paying his water and electricity bills, paying for his children’s schooling or even buying groceries.

15Mr. Senghor’s evidence is that he has on several occasions helped Mr. Droulin with repayable loans. Mr. Droulin’s financial circumstances have been difficult since the beginning of his dispute with Trylon. On various occasions, he has paid Mr. Droulin’s rent so that he would not be evicted from his apartment. He does not hesitate to help him when he can.

16The issue is whether the applicants’ evidence as to their financial circumstances meets the standard of “robust particularity” required by Morton, supra. It does appear from the applicants’ evidence that they are of limited financial means to the point that they have had to borrow money. Although I appreciate the logistical problems associated with sending affidavits to Senegal for execution and then returning the sworn or affirmed documents to Canada, I am concerned that the most recent bank records from the applicants are from more than a year before the date on which the motion was argued. In addition, neither applicant has provided a tax return and there is no evidence that Senegal law does not require an annual tax filing. Most importantly, although both applicants make the bald statement that they cannot borrow money, they say nothing about what efforts they have made to obtain a loan. This is a particularly glaring omission in the case of Mr. Cissé, who acknowledges owning a house with a value of $235,000 (CAD) but who provides no explanation for why he cannot use the house as security for a loan.

17The court in Morton, supra stated that the full financial disclosure required to demonstrate impecuniosity includes “an indication of the extent of the ability of the plaintiffs to borrow funds”. The applicants’ bald statements that they cannot borrow money are not sufficient to meet this burden, particularly given that the applicant Cissé owns a house and yet has not provided any evidence of attempts to borrow money using his house as security. In addition, both applicants have failed to provide tax returns. I therefore conclude that the applicants have not provided sufficient evidence to substantiate their alleged impecuniosity.

Are the merits of the case sufficient to enable the applicants to defeat the motion?

18The only named defendant in the applicants’ original proceeding in Senegal was a company identified as Trylon Senegal. The Senegal judgment of December 13, 2013 refers to the addition of Trylon TSF Inc. (referred to in these Reasons as Trylon Canada) and Trylon TSF International Limited as defendants, by way of an application in the Senegal proceeding dated August 2, 2010. The judgment is rendered against all three Trylon companies.

19The affidavit evidence of Trylon’s deponent John Stevens is that Trylon Senegal was a separate subsidiary of Trylon TSF Inc. (i.e. Trylon Canada) and carried on business in its own name. Trylon Canada did not conduct any business in Senegal; the applicants were employed by Trylon Senegal and Trylon International but never by Trylon Canada. After the applicants were dismissed for wilful misconduct on July 31, 2009, they commenced their proceeding in Senegal in August, 2009. Trylon Canada was made aware of this proceeding by the general manager of Trylon Senegal, which retained counsel in Senegal (Geni & Kebe) to defend it.

20Most significantly, Mr. Stevens deposes that Trylon Canada was not served with the claims against it and had no notice of them.

21Trylon Canada only became aware that it had been named in the Senegal action and of the default judgment in Senegal when it was served with the applicants’ application record in this Ontario proceeding on October 2, 2015.

22Mr. Stevens acknowledges that Trylon Canada had been charged in criminal proceedings in Senegal, and had retained different counsel (Mr. Ly) to defend those charges. Mr. Ly was never retained by Trylon Canada in the civil action, as Trylon Canada had no knowledge of any civil claim against it.

23Mr. Stevens confirmed on cross-examination that Trylon Canada was never served with the civil action naming it as a defendant, was never informed that it had been named in the civil action and their counsel in Senegal who retained Geni & Kebe was also unaware of the action against Trylon Canada prior to service of the Ontario application.

24Trylon Canada’s defence to the application to give effect to the Senegal judgment in Ontario is based on the absence of notice to it of the Senegal civil proceeding.

25Counsel for the applicants refers to a passage in the Senegal judgment stating that the defendants (“les parties défenderesses”), although given notice, neither appeared nor were represented at the hearing following which judgment was rendered. The applicants rely on this passage as evidence that Trylon Canada did have notice that it had been added to the Senegal action.

26The main issue on the application is whether Trylon Canada was given notice of the claims against it, as opposed to Trylon Senegal, in the Senegal action. On this issue, there is conflicting evidence between documents in the Senegal action on one hand, and the evidence of Mr. Stevens on the other. I cannot conclude on this security for costs motion that one party’s or the other’s version of events will likely prevail at the hearing of the application. Accordingly, while the application may ultimately succeed, in the face of the conflicting evidence on the fundamental issue, I cannot conclude on this motion that the application has a good chance of success. The merits of the application are therefore not a bar to the security for costs order sought on this motion.

Is the security interest that the applicant Cissé has purported to give Trylon in his house in Senegal (“Engagement valant caution”) a sufficient substitute for posting security in Ontario?

27Mr. Cissé deposes in his affidavit that in light of his precarious financial situation, he would offer his house as security for costs to the extent of $30,000.00 if so ordered. He further states that he has registered the interest of Trylon TSF Inc. in his house up to $30,000.00, such that Trylon would need do nothing further beyond selling the house to recover the $30,000.00 in the event that it succeeds in the pending application.

28Mr. Cissé’s affidavit includes as an exhibit a document titled in French “Engagement Valant Caution” (which translates roughly as “Undertaking for security”), signed by him on July 25, 2016 and stamped by a “Huissier” (a court official equivalent to a bailiff) in Senegal. In this document, Mr. Cissé offers his property as a guarantee for the recovery of any costs payable to Trylon TSF Inc. to a limit of $30,000.00(CDN).

29Mr. Cissé further deposes that Trylon would not be required to proceed with an application or similar step to have a Canadian judgment recognized and executed in Senegal. Trylon would only be required to sell the house and recover up to $30,000.00 in the same manner as a creditor in Ontario.

30Mr. Cissé’s offer of his Senegal property as security is not a sufficient substitute for the posting of security in Ontario. First, the security is not granted under any order of the Senegalese court and there would appear to be no reason that Mr. Cissé could not withdraw it at any time. Second, although Mr. Cissé has deposed that Trylon would not be required to proceed with an application to a Senegalese court to execute on any Ontario judgment for costs, there is no evidence from a Senegalese lawyer to that effect. In any event, if Trylon were ever awarded costs of the application, it would still have to go to Senegal and take some step to enforce the security interest that Mr. Cissé is purporting to provide. This “is not a step that would be required to enforce an award of costs against an Ontario litigant and is not a step that the respondents should be required to take to collect any costs award” (see: Brown v. Raymond James Ltd. (2007), 51 C.P.C.(6th) 76 at para. 10).

Has there been conduct on the part of Trylon Canada that has compromised the applicants’ financial circumstances?

31As stated above, the applicants submit that their inability to post security resulted from the conduct of the defendants in the Senegal action, including the respondent Trylon Canada. However, this is an issue that relates to the merits of the Senegal action, which Trylon Canada says on this application it had no opportunity to defend. To conclude based on the Senegal judgment that Trylon Canada unlawfully compromised the applicants’ financial position would be to ignore the basis for Trylon Canada’s opposition to the application, being the alleged lack of notice of its addition as a defendant to the Senegal action.

The appropriate quantum of security

32Based on my analysis of the issues set out above, I conclude that the applicants must post security for the costs of their application.

33Trylon’s counsel seeks an order that the applicants post security in the total amount of $57,246.14 based on $10,256.10 for reviewing the notice of application including translation and legal research, a further $9,313.20 for legal research, $9,660.00 for preparing the responding application record, $9,225.00 for preparing for and conducting cross-examinations on the applicants’ supporting affidavits, $8,898.00 for conducting legal research and preparing a factum and book of authorities and $3,048.00 for preparing for and arguing the application. The total figure of $57,246.14 also includes H.S.T. and disbursements.

34Trylon’s bill of costs is based on partial indemnity rates of $372.00/hr and $381.00/hr for Mr. Hirsch, called to the Bar in 2008 and $234.00/hr for Ms. Cotric, called in 2014. Mr. Hirsch’s current actual hourly rate is $635.00/hr and Ms.Cotric’s is $390.00/hr.

35The applicants submit that the costs demanded by Trylon are unreasonable and contrary to the principles established by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, 2004 ONCA 14579, [2004] O.J. No. 2634 (at para. 26):

. . . [T]he rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

36The applicants further submit that the cost of translating French language court documents is not recoverable as that service is available through the court; Trylon could also have retained a bilingual lawyer at the Osler firm. The applicants also take issue with the partial indemnity rates charged by Trylon’s lawyers and submit that the rates as set out above are excessive and unreasonable for counsel of their experience.

37Counsel for the applicants argues that the partial indemnity rates for the two Trylon counsel are greater than those in the Information for the Profession found at the beginning of rule 57. Trylon’s counsel relies on Inter-Leasing Inc. v. Ontario (Ministry of Finance), [2014] O.J. No. 4682, in which the court states that the previous costs grid is out of date and that amounts calculated at 55-60% of a reasonable actual rate more appropriately reflect partial indemnity. Although I accept this statement in Inter-Leasing, it is still necessary to determine what represents a reasonable partial indemnity rate based on what a reasonable actual rate should be in the circumstances.

38Counsel for the applicants submits that the matter is a straightforward one with settled law to be applied to simple facts. The Trylon Bill of Costs fails to be specific in its description of work done or to be done and reflects significant duplication with respect to legal research. There appears to be duplication between the services to be provided by the two Trylon lawyers. Further, should the court condone excessive fees, litigants’ access to justice would be compromised.

39Counsel for the applicants does not suggest an appropriate amount for security other than to submit that it should be “in a fair and reasonable amount to be fixed by the Court, up to and including the $30,000.00 in the Engagement Valant Caution” provided by Mr. Cissé.

40The court in Inter-Leasing contemplated partial indemnity costs based on 55-60% of reasonable actual rates. I accept the applicants’ submission that rates of $635/hr and $390/hr for counsel of nine years and three years of experience respectively are grossly excessive. Reasonable actual hourly rates for counsel of those vintages would be $450.00 (2008 call) and $300.00 (2014 call); 60% of these amounts are $270.00 and $180.00 and I will assess the costs using those rates.

41I also accept that the bill of costs is extremely vague in its description of the services to be performed. Although some legal research would plausibly be required for preparation of the factum, there is no explanation of what legal research was performed in relation to receipt of the application record. Further, I accept that costs are not recoverable in respect of translation of French language documents. I also accept that there is no reason that two counsel would need to be present for cross-examination of the applicants’ deponents on their affidavits.

42I calculate the appropriate amount of security for costs as follows:

To review the applicants’ initial materials: 15 hours x $270.00/hr = $4,050.00 To prepare responding materials: 16 hours x $180.00/hr = 2,880.00 8 hours x $270.00/hr = 2,160.00 To conduct cross-examinations: 15 hours x $270.00/hr = 4,050.00 To prepare factum: 16 hours x $180.00/hr = 2,880.00 8 hours x $270.00/hr = 2,160.00 To prepare for and attend hearing: 8 hours x $270.00/hr = 2,160.00 Total: $20,340.00

H.S.T. (13%) 2,644.20 Disbursements (per Bill of Costs) 288.00 Total: $23,272.20

43The applicants shall post security for costs with the Accountant of the Superior Court of Justice in the amount of $23,272.20, within 90 days of the release of these Reasons.

Costs

44At the conclusion of the hearing, counsel exchanged costs outlines and provided copies to the court. After both counsel made submissions on costs, counsel for the applicants informed the court that he wanted to file an offer that he had made to settle the motion. I refused to accept the offer at that time because the court should make its decision without knowing the substance of any offers to settle the issues before it.

45If the parties cannot agree on the costs of the motion, they may make written submissions, not exceeding three pages each, the moving party Trylon Canada within 30 days and the applicants within 20 days thereafter. The applicants may disclose their settlement offer as part of their costs submission.

Master Graham