Court File and Parties
COURT FILE NO.: CV-11-00437060 MOTION HEARD: 20180504, 20180613 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: German Cardona Soler, Plaintiff AND: KHSL International L.T.D., Steve Kyllo, K.M.A. International Trading Ltd, Daniel Lapointe (aka Daniel Laponte), Robert J. Palkowski, Palkowski & Company Law, Volcanic City Resources (2008) Ltd, Global Empire Management Inc., and Saamis Oil & Gas Limited, Defendants
BEFORE: Master B. McAfee
COUNSEL: M. Smith for the Moving Parties, the Defendants, Robert J. Palkowski and Palkowski & Company Law V. Sharma for the Responding Party, the Plaintiff
HEARD: May 4, 2018 and June 13, 2018
Reasons for Decision
Nature of the Motion
[1] On March 23, 2018, I heard the motion of the plaintiff German Cardona Soler (the plaintiff) for an order to set aside the order of the Registrar dismissing the action for delay dated July 19, 2017. The defendants Robert J. Palkowski and Palkowski & Company Law (the Palkowski defendants) opposed the motion. For reasons for decision released on March 28, 2018 (2018 ONSC 1989), the plaintiff’s motion was granted, the issue of costs of the motion being reserved to the hearing of the within motion.
[2] On May 4, 2018, and June 13, 2018, the motion of the Palkowski defendants for an order dismissing or staying the plaintiff’s action for failure to pay costs and for an order for security for costs proceeded before me. On the motion, counsel for the Palkowski defendants confirmed that the dismissal or stay were sought as against the Palkowski defendants only.
[3] The plaintiff opposes the motion.
Nature of the Action
[4] This action involves an alleged transfer by the plaintiff, on or about June 5, 2008, of $5,000,000.00 USD to the trust account of the Palkowski defendants for investment purposes. It is alleged that the funds were improperly disbursed from the trust account. The plaintiff seeks, inter alia, an order that the defendants pay to the plaintiff the sum of $5,000,000.00 USD.
Analysis
Dismissal for Failure to Pay Costs
[5] As set out in my reasons for decision dated March 28, 2018, there is no issue that the plaintiff is in breach of two costs orders. On December 14, 2016, Justice Akbarali ordered the plaintiff to pay to the Palkowski defendants costs in the all-inclusive sum of $5,395.75. On December 14, 2016, Justice Akbarali also ordered the plaintiff to pay to the Palkowski defendants costs in the all-inclusive sum of $8,858.50. The costs orders were made on interim motions on the plaintiff’s pending summary judgment motion. The plaintiff has failed to pay the costs ordered. It is for this reason that the Palkowski defendants seek to have the action dismissed.
[6] The applicable Rules of Civil Procedure are 57.03(2), 60.12 and 1.04(1):
57.03(2) Where a party fails to pay the costs of a motion as required under subrule (1), the court may dismiss or stay the party’s proceeding, strike out the party’s defence or make such other order as is just.
60.12 Where a party fails to comply with an interlocutory order, the court may in addition to any other sanction provided by these rules,
(a) stay the party’s proceeding;
(b) dismiss the party’s proceeding or strike out the party’s defence; or
(c) make such other order as is just.
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
[7] The Court of Appeal in Garrett v. Oldfield, 2016 ONCA 424 states the following:
[2] Rule 57.03(2) provides the court with the discretion to dismiss a plaintiff’s action for failure to pay a costs order. In determining whether an action should be dismissed, a court must balance the competing interests of the parties and consider all relevant factors: see Tarion Warranty Corp. v. 1486448 Ontario Inc., 2012 ONCA 288.
[8] In Tarion, the respondent claimed $123,803.85 against the appellant for alleged infractions under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c.O.31. As a result of two interlocutory motions the appellant owed the respondent $3,900. The appellant’s defence was struck for failure to pay costs. On appeal, the striking of the defence was set aside. The Court of Appeal states:
[7] Exposing the appellant to a judgment of over $180,000 when there is no suggestion that his defence is without merit, in circumstances where the self-represented appellant had unchallenged evidence before the motion judge that he was impecunious, was a disproportionate response to his failure to pay a relatively small amount of costs that had been outstanding for a relatively small amount of time.
[9] In Tarion, the appellant was given a further period of time to pay the outstanding costs, failing which the respondent may move, on notice, to have the statement of defence struck out.
[10] The parties confirm that when addressing the issue of costs before Justice Akbarali, the plaintiff did not raise an issue of impecuniosity or inability to pay. The plaintiff argues that he has been unable to comply with the costs orders because he is impecunious.
[11] I am not satisfied that the plaintiff is impecunious. Although the plaintiff has sworn affidavits in this action, he did not swear an affidavit with respect to the issue of impecuniosity.
[12] The evidence relied on by the plaintiff with respect to impecuniosity is an affidavit from A. Bolton, a law clerk sworn April 19, 2018, attaching a letter from the plaintiff dated April 18, 2018. In the letter, the plaintiff states that he has no income or assets and does not own any property or anything of value. Ms. Bolton also swore an affidavit on March 13, 2018, wherein she attaches a letter from the plaintiff’s lawyer in Spain dated March 8, 2018. The letter from the lawyer in Spain states that the plaintiff “…has no assets or money at present neither in Spain nor in any country, as far as I can tell.”
[13] When the plaintiff was cross-examined for the purposes of the summary judgment motion on his affidavit sworn June 28, 2016, the plaintiff stated that he has other investments (see page 72 of the transcript from the plaintiff’s cross-examination held on November 22, 2016).
[14] The evidentiary threshold for impecuniosity is high and “bald statements unsupported by detail” are not sufficient (Coastline Corporation Ltd. v. Canaccord Capital Corporation at para. 7).
[15] There is no direct evidence from the plaintiff with respect to impecuniosity. The evidence before me on this issue is not set out with sufficient particularity. There is no supporting documentation. The plaintiff has not met the high evidentiary threshold for establishing impecuniosity.
[16] With respect to a consideration of the merits of the plaintiff’s claim, this is not a motion for summary judgment. The court is not required to engage in a summary judgment type analysis when considering the merits. This case is complex and turns on issues of credibility. In the circumstances of this case, the merits are a neutral factor when considering whether the claim should be dismissed for failure to comply with the costs orders.
[17] In Dang v. Anderson, 2017 ONSC 1448 (S.C.J.) Justice Trimble states as follows at paragraph 15:
[15] While the Court does not wish to prevent people from pursuing their rights through the courts, they cannot do so in face of outstanding costs order, where the failure to pay is unjustified (Susin v. Chapman, 2002 CarswellOnt 4213 (S.C.J.) aff’d 2004 CarswellOnt 143 (C.A.)). Costs orders like any other court order, are to be obeyed. Rules must be obeyed. Orders and rules must be enforced. To hold otherwise in the face of persistent failure to pay costs orders would amount to giving litigants access to the courts with no fear of consequences (Stacey v. Barrie Yacht Club, [2003] O.J. No. 4171 (S.C.J.) para. 15; Baksh v. Sun Media para. 14, 16-17, 19; 1066087 Ont. Inc. v. Church of the First Born Apostolic Inc., 2004 CarswellOnt 3010 (Div.Ct.)). In order for the debtor’s action to be dismissed, however, there must be many costs orders that remain unpaid, the amounts must be significant and/or the failure to pay must be egregious.
[18] In my view, the draconian remedy of dismissing the plaintiff’s action without a hearing on the merits is not justified at this time. Two costs orders made the same day have not been paid. There have not been many costs orders that remain unpaid. The amounts are not significant in relation to the amount claimed. The failure to pay is not egregious. However, court orders are to be obeyed.
[19] The dismissal of a plaintiff’s claim should generally not be imposed as a remedy of first resort (Koohestani v. Mahmood, 2015 ONCA 56 at paras. 54-61 and Greta Energy Inc. v. De Lange, 2015 ONSC 3027 (Master) at paras. 54-59).
[20] I am satisfied that it is just that the plaintiff be provided with a further opportunity to cure his default. I am providing the plaintiff with an additional 60 days within which to comply with the costs orders, failing which the Palkowski defendants may move, on notice, to have the action dismissed.
Security for Costs
[21] The Palkowski defendants also seek an order for security for costs. The security for costs sought are in the amount of $51,656.00 all-inclusive. These costs relate to the plaintiff’s pending summary judgment motion.
[22] The plaintiff agrees that the Palkowski defendants have satisfied their initial onus to demonstrate that it appears that there is good reason to believe that the matter comes within Rule 56.01(1) of the Rules of Civil Procedure.
[23] The onus now shifts to the plaintiff to satisfy the court that an order for security for costs would be unjust.
[24] In Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at paragraphs 23-25, the Court of Appeal states as follows with respect to consideration of the justness of the order:
[23] The Rules explicitly provide that an order for security for costs should only be made where the justness of the case demands it. Courts must be vigilant to ensure an order that is designed to be protective in nature is not used as a litigation tactic to prevent a case from being heard on its merits, even in circumstances where the other provisions of rr. 56 or 61 have been met.
[24] Courts in Ontario have attempted to articulate the factors to be considered in determining the justness of security for costs orders. They have identified such factors as the merits of the claim, delay in bringing the motion, the impact of actionable conduct by the defendants on the available assets of the plaintiffs, access to justice concerns, and the public importance of the litigation. See: Hallum v. Canadian Memorial Chiropractic College (1989), 70 O.R. (2d) 119 (H.C.); Morton v. Canada (Attorney General) (2005), 75 O.R. (3d) 63 (S.C.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 99 O.R. (3d) 55 (S.C.); Wang v. Li, 2011 ONSC 4477 (S.C.); and Brown v. Hudson’s Bay Co., 2014 ONSC 1065, 318 O.A.C. 12 (Div.Ct.).
[25] While this case law is of some assistance, each case must be considered on its own facts. It is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness of a security for costs order. There is no utility in imposing rigid criteria on top of the criteria already provided for in the Rules. The correct approach is for the court to consider the justness of the order holistically, examining all of the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.
[26] In my view the interests of justice require that no order for security for costs be made in the circumstances of this case.
[27] The motion for security for costs was first brought in response to the plaintiff’s motion to set aside the Registrar’s dismissal order. This action was commenced in 2011. The Palkowski defendants delivered a statement of defence in or about July 2013.
[28] There is no issue that the plaintiff has always been a resident outside of Ontario.
[29] Since 2016 until the time of the dismissal in July 2017, the parties have been delivering material, conducting cross-examinations, attending case conferences, proceeding with interim motions and addressing procedural issues concerning the plaintiff’s motion for summary judgment.
[30] The parties were in the process of proceeding with the plaintiff’s summary judgment motion in 2017, when the action was dismissed for delay.
[31] The Palkowski defendants seek security for costs relating to the costs of the motion for summary judgment. The delay in bringing the security for costs motion, after the majority of the costs associated with the summary judgment motion have been incurred, weighs against granting an order for security for costs.
[32] With respect to the merits, as stated above, the court is not required to 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 (Sanokr-Moskva v. Tradeoil Management, 2017 ONSC 1780 (Master) at para. 14).
[33] The merits of this action are addressed in the affidavits filed on this motion which include the affidavits delivered on the summary judgment motion, transcripts from the cross-examinations held with respect to the pending summary judgment motion, and answers on written examination for discovery of the Palkowski defendants and the defendant Lapointe.
[34] The issues in this action include ownership of the funds paid into the trust account of the Palkowski defendants, whether there were proper instructions to pay the monies out of the trust account, the relationship, if any, of the Palkowski defendants to certain entities where the monies were paid, the relevance of alleged similar past conduct concerning disbursement of trust funds and the effect of any acknowledgment that the funds are owing to the plaintiff.
[35] This is a complex action involving issues of credibility. Success or failure in this action do not appear obvious. The merits cannot be properly assessed on this motion (Coastline at para. 7). The merits are a neutral factor on this motion for security for costs.
[36] As found above, the plaintiff has not satisfied me of impecuniosity.
[37] Having regard to all of the circumstances, I am satisfied that an order for security for costs of the costs would be unjust.
Costs of this Motion and of the Motion to Set Aside the Registrar’s Dismissal Order
[38] With respect to costs of the within motion, although I did not dismiss or stay the action as requested by the Palkowski defendants, the plaintiff is in breach of two court orders requiring him to pay costs. The plaintiff has been given a further opportunity to comply with the court orders. There shall be no costs of the within motion payable to any party.
[39] With respect to costs of the motion to set aside the Registrar’s dismissal order, notwithstanding the success of the plaintiff on that motion, I decline to award costs. The plaintiff obtained an indulgence from the court.
Order
[39] Order to go as follows:
- The plaintiff shall pay the costs as ordered by Justice Akbarali on December 14, 2016, within 60 days from today’s date, failing which the Palkowski defendants may move, with notice, to dismiss the action as against them.
- The motion for security for costs is dismissed.
- There shall be no costs of this motion.
- There shall be no costs of the motion to set aside the Registrar’s dismissal order.
- As set forth in my order dated March 28, 2018, the Registrar is directed not to dismiss the action for delay pending any further order concerning a new set down date.