Court File and Parties
COURT FILE NO.: 2511/17 DATE: 2018/09/05 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Dan Andersson and LEO Canada Inc., Plaintiffs AND Geraldine Aquino and Atif Kamran, Defendants
BEFORE: George J.
COUNSEL: Chris Kinnear Hunter, for the Plaintiff Dan Andersson Keegan Boyd, for the Defendant Atif Kamran
HEARD: August 8, 2018
Endorsement
[1] The Defendant Atif Kamran seeks an order pursuant to r. 56.01 of the Rules of Civil Procedure requiring the Plaintiff Dan Andersson to post security for costs in the amount of $150,000.00.
[2] This is a discretionary remedy meant to ensure funds are available to reimburse a defendant’s costs should they succeed in defending a claim. The governing rules provide that:
56.01(1). The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as it is just where it appears that,
(a) The plaintiff or applicant is ordinarily resident outside Ontario…
56.04. The amount and form of security and the time for paying into court or otherwise giving the required security shall be determined by the court.
[3] The Plaintiff LEO Canada is an Ontario company based in Markham. Its business is the sale of entrepreneurship seminars and conferences. It was incorporated in 2014 and is part of the global LEO group of companies. LEO’s main entity is based in the United Kingdom (LEO UK). There are affiliates in other countries including India, Dubai and Hong Kong.
[4] Andersson and Kamran cofounded LEO. Andersson ordinarily resides in the UK. He was the CEO, President, a director and is a shareholder of LEO Canada. Kamran also ordinarily resides in the UK.
[5] The Defendant Geraldine Aquino was an employee, director and officer of LEO Canada. She ordinarily resides in Ontario.
[6] In the main action Andersson seeks an injunction that would prevent the Defendants from contacting the employees and contractors of LEO Canada, attending its Markham office, and from acting as or holding themselves out as officers, directors or shareholders. He seeks several declarations, an accounting, and damages for breach of contract, conversion, misappropriation of property, breach of fiduciary duty, conspiracy, fraud and unjust enrichment.
[7] Andersson pleads that Kamran was terminated by LEO in January of 2017 after the receipt of preliminary findings from an internal investigation (forensic audit) into his conduct as Chief Marketing Officer for LEO UK. He pleads that after termination he directed Aquino not to associate with Kamran while the audit process was ongoing. He further pleads that Aquino was terminated after, he alleges, she contravened the direction.
[8] This matter involves a host of cross allegations of financial impropriety. For the purposes of this motion it is not necessary to repeat them all. It is sufficient to know that Andersson claims that Aquino and Kamran, after termination, held an “illegitimate” special shareholder meeting at which time they removed him as CEO, appointed Kamran as President and Secretary, and fraudulently transferred his shares in LEO Canada. Andersson concedes that prior to the share transfer he had granted to Aquino a Power of Attorney, without restrictions, but that this share transfer was fraudulent and in breach of her obligations as an attorney. Aquino claims that she sought Andersson’s direction before proceeding with the transfer. This is a factual contest I am not addressing.
[9] In support of this motion, Kamran relies upon and advances these grounds. First, Andersson is not ordinarily resident in Ontario. Second, Andersson does not own assets in Ontario that could satisfy a costs award made against him. And third, he is not impecunious.
[10] Kamran argues that the costs he can reasonably expect to incur in defending this claim through trial is $150,000.00 on a partial indemnity scale. He has filed a draft bill of costs detailing these expenses including a breakdown of his counsel’s hourly rates and anticipated work. He argues that, since Andersson is not ordinarily resident in Ontario, it is his onus to show either that he is impecunious or has insufficient assets to satisfy a costs award.
[11] Andersson acknowledges he does not reside in Ontario. He does not suggest he is impecunious. He, however, says he has sufficient assets in Ontario that could satisfy a costs award, namely his shares in LEO Canada. He further points to his shares in LEO UK, a country that has an agreement with Canada to reciprocally recognize and enforce judgments. He further argues that there are other aspects of this case that weigh against a security for costs order, including:
- An allegation that Kamran’s motion is tactical, and not a sincere effort to garner a reasonable measure of protection.
- That Kamran himself is not ordinarily resident in Ontario.
- Kamran is too a plaintiff (by counterclaim), and that each side is aggressively advancing allegations and claims of their own.
- That Kamran could just as easily be the originating plaintiff in this matter – as he was simultaneously planning to commence litigation against Andersson – and that it is only by chance he isn’t. He just happened to be “first off the mark”.
[12] In the alternative, should security be ordered, Andersson argues that it should be far less than the amount set out in the draft bill of costs. He sees these problems with Kamran’s position. First, the amount that is said to be his anticipated litigation costs appear to include his prosecution of the counterclaim. And second, it is unreasonable to include costs for three lawyers.
[13] There are well established principles that must guide me. First, motions for security for costs should not be viewed as an extraordinary procedure but as a reasonable measure to ensure a defendant is protected if successful in their defence. Also, when a plaintiff is not ordinarily resident in Ontario, and is not impecunious, the plaintiff must lead convincing evidence and articulate a compelling reason to not order security for costs.
[14] Has Andersson done so?
[15] In answering this question, I have broad discretion. The analysis is not to be formulaic but rest on the specific facts of each case. I make this point because Kamran seemed to suggest that, in those cases where the three requirements are met (and when the onus shifts to the plaintiff), I have no choice but to order the posting of security. While in certain circumstances this may be the typical and preferred outcome, it is not how I should approach this task. Rule 56.01 does not create a prima facie right or entitlement to security for costs. It is a question of fairness and justness.
[16] Again, there is no question that Andersson is a non-resident and no suggestion he is impecunious. As such I will address whether he has sufficient assets in Ontario and, if not, whether there is any other reason an order should not issue.
[17] Andersson argues this at paras. 23, and 25 – 26 of his factum:
Mr. Andersson has assets in Ontario that would be available to satisfy a costs order. In particular, Mr. Andersson is a founding shareholder of LEO Canada domiciled in Ontario.
The court can…infer that LEO Canada’s shares are valuable from the fact that Mr. Kamran is fighting tooth and nail to retain control of the impugned shares at the heart of the action. Mr. Kamran would not spend over $300,000 – his own counsel’s estimate of its fees – to maintain control of a worthless company.
Alternatively, if Mr. Kamran is prepared to spend over a quarter million dollars to maintain control of a worthless company, he is hardly the type of litigant who requires security for his costs.
[18] He also claims that the company’s bitcoin assets – which LEO accepts as a form of payment – has a current value of several million dollars which, while it is unclear how much of this is attributable to LEO Canada v. LEO UK, is still indicative of the company’s overall value.
[19] Kamran argues that these shares should not be considered an appropriate asset under r. 56.01. He claims the bitcoin wallet balance shows only a negligible amount and that it has previously shown a negative balance.
[20] I find that these shares should not, for the purposes of this motion, be considered an asset that would ameliorate any need for a security for costs order. The record before me just does not allow for a sound assessment of their value. To the extent the bitcoin balance gives us a sense of the value of LEO Canada shares, it actually reveals them to be severely diminished. Furthermore, the serious and competing allegations of financial impropriety, if any are true, has (and will have) a detrimental impact on share value. There is simply too much uncertainty surrounding LEO Canada.
[21] Is there any other reason why a security for costs order should not issue? At this stage of the analysis I am to focus on the strength of the plaintiff’s case and, only if satisfied that success is obvious or overwhelming, should I decline to make an order.
[22] I make no such finding. Here we have competing allegations which will ultimately require a credibility assessment by a trier of fact. The facts are not overwhelmingly in one party’s favour.
[23] What of the ‘first off the mark’ argument and what is the import of the counterclaim? There is some merit to the argument that Kamran could just as well be the originating plaintiff in this case. And it is true he is a plaintiff by counterclaim. This is important context. The problem I have is, to focus on this and allow it to be the determinative factor would, in effect, require that I speculate on why Andersson has decided not to pursue a claim for security for costs, which is irrelevant.
[24] Also, I am unable to conclude that Kamran’s motion is purely tactical intended only to delay the outstanding request for an injunction.
[25] Having concluded that an order is necessary, I do accept Andersson’s submission that the amount should be moderated taking into account the reasonableness of Kamran’s anticipated costs, number of lawyers involved, and the overlap of expenses to defend the main action and pursue the counterclaim.
[26] To fix a specific quantum requires, unfortunately, a certain level of guesswork. I must determine what anticipated costs are reasonable, which is by its nature a subjective exercise. Andersson has provided a breakdown of what he says would adequately address any security concerns arguing that the appropriate amount is $16,800.00. He further argues that if I make an order, I should have it paid into court in installments.
[27] I won’t repeat Andersson’s calculation and how he arrived at that figure, other than to point out that it is, in the circumstances, far too low to adequately represent the nature of and risks associated with this litigation. I do agree with him that there should be a significant reduction from what is set out in counsel’s draft bill of costs, but, again, not to the extent he suggests.
[28] The proper approach is to significantly reduce the claimed (and anticipated) partial indemnity costs ($150,000.00) to an amount that recognizes the existence of the counterclaim, and reasonably reflects the amount of legal work (and number of lawyers) that, in my judgment, is required.
[29] In the result I make this order:
- The plaintiff Dan Andersson is to post security for costs of this action in the amount of $50,000.00, payable into court in two installments as follows: (a) $20,000.00 within 30 days of this order, and (b) $30,000.00 within 30 days of the matter being set down for trial.
[30] Should the parties not agree on costs I invite brief written argument not to exceed 3 pages. Kamran has 30 days to file; Andersson 10 days after receipt of Kamran’s submissions.
“Justice J. C. George” Justice J. C. George Date: September 5, 2018