CITATION: Marvello Construction Ltd. v. Santos, 2017 ONSC 6558
COURT FILE NO.: CV-11-438456
DATE: 20171101
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Marvello Construction Ltd., Plaintiff
AND:
Antonio Santos and 1239018 Ontario Ltd. o/a Lucky Carpentry, Defendants
BEFORE: Madam Justice Darla A. Wilson
COUNSEL: Domenic Saverino, Counsel for the Plaintiff
Theodore B. Rotenberg, Counsel for the Defendants
HEARD: October 24, 2017
ENDORSEMENT
[1] The Plaintiff appeals the order of Master Jolley of June 26, 2017 which granted the motion of the Defendants requesting an order for security for costs.
Background
[2] The Plaintiff commenced this action in 2011 claiming monies owed from the numbered company, Lucky Carpentry (“Lucky”), and its directing mind, Antonio Santos (“Santos”) arising from house framing work Marvello provided to Lucky as a subcontractor during the period from 2005 to 2007. It is alleged that the Plaintiff is owed at least $800,000.00 for this work.
[3] The Plaintiff also alleges that there were acts of corporate misconduct such as transferring assets and there is a pleading for relief pursuant to section 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”). The Defendants deny that any monies are owing but in any event, they plead the claims are statute barred.
[4] Sections 248(1) and (2) of the OBCA provides as follows:
- (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.
(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,
(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;
(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or
(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.
[5] The Plaintiff set the action down for trial in 2015 without conducting examinations for discovery of the Defendants. In June 2017, the Defendants launched a motion for security for costs arguing the Plaintiff is an inactive corporation without assets and the claim has little chance of success, so there is a concern that any costs order made against the Plaintiff would not be paid.
[6] In written reasons released June 26, 2017, the Master granted the motion of the Defendants and ordered the Plaintiff pay security for costs at various stages of the litigation for a total sum of $92,764.53. It is from this order that the Plaintiff appeals.
Analysis
[7] Counsel agree that the order of a Master should only be overturned if there was an error of law made or the Master exercised discretion on wrong principles or misapprehended evidence such that there is a palpable and overriding error: Zeitoun v. Economical Insurance Group, 2008 CanLII 20996 (ON SCDC), 91 O.R. (3d) 131.
[8] The solicitor for the Plaintiff argues that the Master erred in law by failing to recognize that the claim in its essence is an oppression case and section 248 of the OBCA does not require a Plaintiff to post security for costs in an action brought for an oppression remedy. Mr. Severino submits that while there are claims made for monies owed for work done pursuant to an agreement between the parties, the case is fundamentally one of oppression, as articulated in paragraphs 55 through 61 of the Statement of Claim. In those paragraphs, the Plaintiff alleges the Defendants improperly stripped Lucky of any assets which prevented the Plaintiff from getting paid. As a result, it is submitted, the Master exercised her discretion on wrong principles in failing to recognize this is a case of oppression, and thus, she made a palpable and overriding error.
[9] I do not accept the argument advanced by the solicitor for the Plaintiff. In her thorough written reasons, the Master began by correctly identifying that, on the evidence, the Defendants demonstrated that there is good reason to believe that the Plaintiff has insufficient assets in Ontario to pay any costs order that might be made and thus, the motion for security for costs was properly brought.
[10] She then specifically dealt with the issue of whether the action is an oppression remedy case and therefore immune from an order for security for costs. She turned her mind to the proper analysis as set out in Konig v. Hobza, 2013 ONSC 1060, 2013 CarswellOnt 5650, and examined the pleading to determine the essence of the case. The Master stated:
One must look at the substance of the action to determine what is really at issue in a pleading such as this…Here the issue is, in essence, one of unpaid invoices. The reference to the oppression section appears to be pleaded to assist the Plaintiff to trace any payment obligation from the corporate defendant to the individual defendant. While the claim does reference section 248 of the OBCA and does contain a statement that the defendants’ actions were oppressive, at its core it is a claim for payment for services rendered and should not be shielded from a security for costs award.
[11] Paragraphs 1 through 54 describe in some detail the work that was done by the Plaintiff, how he was to be paid, the failure of the Defendant Santos to make the payments, the new agreement that was worked out between the parties, and the ultimate failure of the Defendants to make the payments in accordance with the agreement. Paragraph 55 alleges that the Defendants took actions to defeat the Plaintiff’s claims and ensure he would not be paid. There are a few other paragraphs that also refer to section 248 of the OBCA.
[12] I agree with the submissions of Mr. Rotenberg that the Statement of Claim contains reference to oppression but there are no facts pleaded upon which to support a finding of oppression. There are no acts that are set out which could be deemed oppressive to the Plaintiff; rather, there are simply some bald statements such as transferring mortgages to other people, not recording inventory, acting in a manner which was oppressive and other similar allegations. In short, there are no specific actions of the Defendants that are described that might be construed as oppressive conduct under the OBCA.
[13] The case law is clear that a mere reference to oppression is not sufficient to prohibit an order for security for costs. The Master correctly addressed her mind to what the “real, true nature of the Plaintiff’s claim” was: Abdalla v. Skalin, [2004] O.J. No. 2981. She found it was essentially a claim for payment due for work that was performed; she did not find the claim was, at its core, an oppression claim. I agree with her analysis and find that in scrutinizing the real true nature of the Plaintiff’s claim, she did not make a palpable and overriding error.
[14] I accept that the oppression claim is one that the Plaintiff is advancing, albeit without any factual basis in the pleading. At its best, the oppression claim is but one of a number of claims advanced by the Plaintiff; for certain it is not the essence of the claim. Thus, the making of an order for security for costs was not precluded pursuant to section 248 of the OBCA.
Conclusion
[15] The appeal is dismissed. The successful Defendants are entitled to their costs on a partial indemnity basis which I fix at $2,500 plus HST plus the disbursements of $206.46 plus HST payable forthwith.
D.A. Wilson J.
Date: November 1, 2017