CITATION: Boudreau v. TMS Lighting Ltd., 2017 ONSC 6188

COURT FILE NO.: CV-11-4161

DATE: 20171017

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JAMES BOUDREAU, EVAN BOUDREAU, JAMES W. BOUDREAU and LAUREN BOUDREAU by her litigation guardian JAMES S. BOUDREAU, Plaintiff/Responding Party

AND:

TMS LIGHTING LTD, DAVID BAHRA, and ONTARIO FEDERATION OF SNOWMOBILE CLUBS, Defendants/Moving Parties

AND:

SUKI BAHRA and PAUL EDLICHER, Third Parties/Moving Parties

BEFORE: McSweeney J.

COUNSEL: C. Grinyer, for the Plaintiff/Responding Party

M. Kohli and L. Sharvit, for the Defendants/Third Parties/Moving Parties

HEARD: September 20, 2017

ENDORSEMENT

1This is a rule 56.01 motion for security for costs in a personal injury action. This motion is brought by the defendants, TMS Lighting Ltd. and David Bahra, and by the third parties, Suki Bahra and Paul Edlicher, against the plaintiff James S. Boudreau. The defendants and third parties (collectively the “moving parties”) jointly request security for costs in this action.

2The plaintiff lives in Connecticut, United States of America. He was injured in Killarney, Ontario, in March 2009 while attending a work-related social event for the lighting industry. While operating a snowmobile on a group snowmobile trek, the plaintiff lost control of the vehicle, hit a tree, and sustained serious injuries. He is now paraplegic.

3The Plaintiff issued his claim on February 25, 2011. He seeks 15 million dollars in damages. He alleges that the defendants, hosts of the event, owed him a duty of care and breached it by failing to train and supervise him appropriately as a novice snowmobile driver. The defendants and third parties deny that a duty of care arose in the circumstances of the social event, and plead inter alia that the plaintiff assumed all relevant risks.

4The moving parties’ position is as follows:

a) Liability is strongly contested;

b) It is acknowledged that Connecticut is a reciprocal jurisdiction, however the plaintiff has not provided the financial disclosure required, and therefore has not established that he is exigible;

c) The plaintiff is not impecunious, and posting security for costs would not cause him hardship.

The Law:

[5]

The Law

Rule 56.01 of the Rules of Civil Procedure governs the availability of security for costs. Rule 56.01 provides:

(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;

b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;

c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;

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; or

f) a statute entitles the defendant or respondent to security for costs. R.R.O. 1990, Reg. 194, r. 56.01 (1).

Evidence on the motion:

[6]

Evidence on the motion

The facts were not significantly in dispute. The following facts and conclusions are based on the evidence:

a) The plaintiff resides in Connecticut and has no assets in Ontario.

b) The plaintiff has retirement savings and some investments: the parties agree that he is not “impecunious” within the meaning of rule 56.01.

c) The plaintiff has cost insurance which could provide him with up to $20,000.00 to satisfy an adverse cost award.

d) Connecticut is a reciprocal enforcement jurisdiction.

e) There is support on the record for both the moving parties’ and the plaintiff’s opposing positions on liability.

f) The plaintiff’s claim is not frivolous and/or vexatious.

g) Status of litigation: All parties have undergone discovery, and further discovery of the plaintiff on his undertakings is a next step. The action has not been set down for trial. A pretrial conference is scheduled for November 2017.

h) For the purposes of this motion, I accept the moving parties’ evidence that they have, collectively, incurred over $60,000 in costs to date. I further accept that the costs of defending the plaintiff’s case at trial are anticipated to exceed $100,000.

The Onus is on the Plaintiff:

[7]

The Onus is on the Plaintiff

Having found that the Plaintiff lives in Connecticut, has no assets in Ontario, and is not impecunious, Rule 56.01(1) is engaged, as the threshold condition in (a) and (d) has been met.

8The onus on this motion is therefore on the plaintiff to establish that an order for costs would be unjust: Kymbo International Inc. v. Teskey, [2004] O.J. No. 4126 at para. 4.

9The plaintiff raises several arguments to resist an order requiring him to post security:

a) The claim is meritorious;

b) The defendants delayed too long in bringing the motion;

c) Plaintiff has cost insurance in the amount of $20,000;

d) Connecticut is a reciprocal jurisdiction and a cost order could therefore be enforced against the plaintiff in that jurisdiction; and

e) Posting of security would cause hardship.

10I will briefly address each of these arguments:

Claim is meritorious:

[11]

Claim is meritorious

Where a plaintiff has not established impecuniosity, he or she must meet a high threshold to show that the case has a “probability of success” such that there is a correspondingly low probability that the plaintiff will have to pay costs at the end of the day: Morton v. Canada (AG), 2005 6052 (ON SC), [2005] O.J. No. 948 (ONSC) at para. 21. That threshold is not met here. While the plaintiff’s claim is not frivolous or vexatious, liability is strongly contested. In this case, the key issue is whether or not a standard of care arose. In the circumstances of this case, the plaintiff’s materials do not establish a “probability of success”.

Delay in bringing motion:

[12]

Delay in bringing motion

This motion was served in February 2016, five years after the claim was issued. The plaintiff does not allege prejudice from the delay. The record shows that the issue of security for cost was first raised by the defendant, TMS Lighting in mid-2015.

13The plaintiff relies on the case of Pelz v. Anderson, 2006 39571 (ON SC), [2006] O.J. No. 4726 (ONSC) in support of his argument that there is no need to establish prejudice where delay is significant and unexplained.

14I observe that the Pelz case offers a useful discussion of the potential prejudice to a defendant’s interest that may arise or be inferred when a security motion is brought close to trial. There may be circumstances, such as those reference in Pelz, where the timing of such a late motion has the effect of inhibiting the plaintiff’s ability to meet the costs of preparing for trial. The analysis in Pelz supports an approach of increased scrutiny by the courts are to the reasons for a delayed security motion on the basis that of a late motion may be a “tactical ploy to stifle a valid claim”: Pelz, at para. 12.

15I note that the delay in bringing the motion is comparable to the length of time in the Pelz case. However, the plaintiff does not allege prejudice, and the record supports a finding that the plaintiff is not in fact required to expend costs in preparation for trial as he is being represented on a contingency fee basis.

16Further, I note it is not in dispute that although the moving parties raised the issue of security for costs in 2015 in the context of discussions of plaintiff’s residency in the United States and the fact the all his assets are outside of Canada, the motion was not returned at that time. The record shows that on January 12, 2016, the plaintiff’s counsel advised the moving parties counsel that “we have been unable to contact our client since late last year” and advise that the upcoming pretrial conference “may need to be adjourned”. On January 29, 2016, they further advised that the plaintiff’s “Connecticut counsel have also been unable to locate him”, and stated that as a result they would like to adjourn the pretrial conference scheduled for May 11, 2016.

17The moving parties’ motion for security was filed shortly after learning that the plaintiff could not be located. In the circumstances, the timing of the security for costs motion was reasonable. In this case, the record does not support a finding or inference of prejudice to the plaintiff from the timing of the motion. Rather, the reasonableness of the bringing of the motion is a reasonable response by the moving parties to new circumstances communicated to them by the plaintiff’s counsel.

Cost insurance:

[18]

Cost insurance

In the decision of Shah v. Loblaws Group of Companies Ltd., 2015 ONSC 5987, Justice Lemon considered an argument that security for costs is not needed where the plaintiff has costs insurance. Given the similarity between the costs insurance policy conditions in that decision and those in the record before me, summarized in the moving parties’ factum at para. 29, I find the reasoning and conclusions of Justice Lemon applicable to this case: Shah at paras. 22 and 23. In short, the moving parties are not party to the insurance for costs, and therefore have no ability to control or ensure the plaintiff’s compliance with the terms of the policy such that recovery can be relied upon with any certainty in the event that the plaintiff is unsuccessful at trial.

19I further note that the face value of the policy falls far short of the likely quantum of an adverse cost award against the plaintiff if he is unsuccessful at trial. Accordingly, the existence of the plaintiff’s costs insurance does not assist the plaintiff.

Exigible assets:

[20]

Exigible assets

The evidentiary onus on a plaintiff seeking to resist an order for security has been described by as “very high, as is the level of financial disclosure”: Sandella’s Franchising LLC v. Fuller Landau et al, 2013 ONSC 4418 at para. 16, per Master Haberman. Financial information must be set out with “robust particularity” which leaves “no unanswered material questions”: Morton at para. 32 per Quinn J.

21The plaintiff does not own real property. He disclosed the existence of a “401K” retirement pension (approximate value $200,000 USD) and of smaller value securities and bank accounts from different years (approximate combined value $35,000 USD), but did not provide evidence of the liquidity or otherwise of these holdings. Nor did the evidence clarify whether the plaintiff’s family, such as his former spouse or child, would have a beneficial interest or priority claim on those same assets which would preclude or inhibit their realization to satisfy a cost award.

22I agree with the moving parties that the plaintiff’s financial disclosure is far from “robust”, and amounts to a “snapshot” of his assets, giving a general picture, without sufficient detail to permit a more detailed review.

23I further note that although Connecticut was acknowledged to be a reciprocal jurisdiction with Ontario for the enforcement of court orders, the plaintiff led no evidence of the procedure which the moving parties could follow in Connecticut to enforce an Ontario judgment against assets of the type owned by the plaintiff.

24For the reasons above, I conclude that the evidence filed by the plaintiff has failed to meet the requisite level of financial disclosure.

Hardship to plaintiff:

[25]

Hardship to plaintiff

The case law establishes that where, as here, a plaintiff is not impecunious, “the court is entitled to assume that an order for security can be complied with”: Kymbo at para. 4.

26In Morton, the court emphasized that an order for security is not a finding that the plaintiff owes money. It is solely an order which balances the extraterritorial plaintiff’s right to bring an action in Ontario against the defendants’ reasonable right to recover their costs if the plaintiff is unsuccessful.

27The evidence on this motion does not support the plaintiff’s contention that the posting of security would cause him hardship. The record confirms that his health and care needs relating to his injury are fully covered by workers compensation. The plaintiff is currently working and has a total income of close to $90,000 USD, per year based on a combination of employment income and a worker’s compensation benefit of $61,000 USD per year.

What quantum of security is appropriate?

[28]

What quantum of security is appropriate?

The purpose of security of costs motions is to provide some protection for domestic defendants, and at the same time, not create a barrier which prevents the Plaintiff from pursuing his claim. The nature of this balance depends on the circumstances of each case.

29Rule 56.01 has significant discretion in its wording, specifying that “the court may make such order for security for costs as is just” [emphasis added]. I therefore have discretion to consider what is just, based on all the circumstances of the litigation, and bearing in mind the purpose identified above.

30In considering an appropriate quantum, I have also considered the submissions of the defendants as well as their costs incurred to date and their projected costs of going to trial. They ask that the plaintiff be ordered to post an amount close or equivalent to their full costs to date. They filed no case law to support such full indemnification at this stage of the action. I find that such a level of security is not necessary in this case.

31I note further that while the evidence does not support the plaintiff’s contention that posting any security would cause him hardship, he will likely have to pay a carrying or interest cost associated with the amounts posted. He is currently employed, and has sufficient income to meet his current cost of living. He is not, however, by any stretch a rich man. He does not own a home and relies on monthly worker’s compensation payments to supplement his salary.

32I consider further that the plaintiff has sustained serious and permanent injuries. He will require the use of a wheelchair for the rest of his life. While the liability for his injuries is in dispute, the reality of his compromised health is not. I agree with plaintiff’s counsel that it is important that the quantum of costs imposed do not prevent the plaintiff from advancing his litigation.

33I also consider the existence of the plaintiff’s cost insurance policy to be relevant in this case to the quantum of security required. I do so because the purchase of such insurance signals some prudence and awareness on the part of the plaintiff as to the cost risks he has undertaken by commencing a civil action in Ontario.

34Although I have concluded above that the moving parties’ ultimate ability to recover under the policy, if they are successful, is not a certainty, the purpose of the plaintiff obtaining and maintaining such a policy is presumably so that the moving parties could recover costs. In view of the existence of the policy, I have reduced the quantum of security I would otherwise have ordered. This notional reduction is $10,000.00, a reduction of approximately 50% of the policy’s face value, to account for the uncertainty of its potential availability to the moving parties.

35I further note that it is important to distinguish the payment of costs from the posting of security. Quinn J., in Morton, supra at para. 33 describes the nature of security succinctly. Quinn J. states, “if the plaintiff is confident in the merits of their case, an order for security for costs is simply an investment with a modest yield.”

36I agree that it is appropriate for security to be paid in stages as the litigation advances. In this regard, I follow the approach contemplated in Rule 56.04.

37On all the factors above, I find it appropriate to order security for costs in the amount of $60,000, as set out below.

38It is therefore ordered that plaintiff, Robert S. Boudreau, shall make the following payments into court:

a) $20,000 by December 1, 2017;

b) $20,000 at the conclusion of the further discoveries; and

c) $20,000 at least 120 days prior to commencement of trial.

39All payments are to be made by cash, bond, letter of credit or other acceptable form of security payable to or in favour of the Accountant of the Superior Court of Justice. I may be spoken to if there is need to approve the form of the security.

Costs:

[40]

Costs

Costs of this motion are reserved to the trial judge. Parties attended court for 6.0 hours on the motion.

McSweeney J.

Date: October 17, 2017

CITATION: Boudreau v. TMS Lighting Ltd., 2017 ONSC 6188

COURT FILE NO.: CV-11-4161

DATE: 20171017

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JAMES BOUDREAU, EVAN BOUDREAU, JAMES W. BOUDREAU, LAUREN BOUDREAU by her litigation guardian JAMES S. BOUDREAU, Plaintiff/Responding Party

AND:

TMS LIGHTING LTD, DAVID BAHRA,

and ONTARIO FEDERATION OF