Court File and Parties

COURT FILE NO.: CV-17-570057 DATE: 20180921 SUPERIOR COURT OF JUSTICE – ONTARIO

B E T W E E N:

GINTER BACA and LEASE ADMINISTRATION CORPORATION, Plaintiffs

• and -

VASILI TATARINOV, VITALII GODONOOGA, ONTARIO CONSUMER HOME SERVICES INC., and VIVA FINANCIAL, Defendants

BEFORE: Copeland J.

HEARD: September 20, 2018

COUNSEL: Michael Simaan, for the Plaintiff/Appellant Lease Administration Corporation James Zibarras, for the Defendants/Respondents

Endorsement

[1] The appellant, Lease Administration Corporation (“LAC” or “the appellant”), appeals pursuant to s. 17(a) of the Courts of Justice Act from the Order of Master McGraw, dated February 26, 2018, granting the defendants’ motion for security for costs under Rule 56.01(d) of the Rules of Civil Procedure.

The Standard of Review

[2] The parties disagree on the standard of review applicable to this appeal. The appellant argues that it is correctness. The respondents argue that it is reasonableness. Their dispute about the standard of review is not about the applicable law, but rather about the characterization of the errors that the appellant alleges were made by Master McGraw.

[3] The applicable standard of review for this appeal is well-settled. The standard of review on questions of law is correctness. The standard of review on issues of fact, including appreciation of evidence, is that an appellate court should not intervene unless there is a palpable and overriding error. For questions of mixed fact and law, the standard of review is palpable and overriding error, unless there is an extricable question of law (to which the correctness standard would apply). The palpable and overriding error standard of review addresses both the nature of the error, and its impact on the result. “Palpable” refers to errors that are obvious or plain to see. “Overriding” refers to the effect on the outcome of the decision. To be overriding, an error must be sufficiently significant to vitiate the challenged finding of fact: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Zeitoun v. Economical Insurance Group; affirmed, 2009 ONCA 415.

[4] Put simply, if the decision of a master to order security for costs is based on correct legal principles, and the findings of fact are reasonable, this court sitting on appeal ought not to interfere: Zeitoun, supra at para. 52 (Div. Ct).

[5] I will deal with the characterization of each alleged error for standard of review purposes below.

Analysis

[6] I have carefully reviewed the reasons of Master McGraw, the record, and considered the submissions of the parties.

[7] I start by noting that Master McGraw correctly stated the applicable legal analysis in considering whether to order security for costs at paragraphs 38 to 44 of his reasons.

[8] Of course, as a matter of law, stating the correct test is not enough, if the reasons show that the legal analysis applied used an incorrect legal test. However, on reviewing Master McGraw’s reasons, I find that he not only stated the correct legal test to be applied, he also applied the correct legal test. I further find that his factual and ultimate conclusions are reasonable. I will explain my conclusions by addressing the primary arguments raised by the appellant.

(i) Was Master McGraw bound by the previous motion ruling of Justice C. Brown?

[9] The appellant advances many grounds of appeal, but many are interrelated. The primary thrust of the appellant’s argument is the claim that Master McGraw erred in law in not treating Justice C. Brown’s findings of fact on an interim motion for return of property as binding and determinative of certain issues in the case.

[10] With respect, the appellant is wrong on this issue as a matter of law.

[11] If an order is not final, it is not binding. Put differently, factual findings on interim motions are not binding on another judge (or master) later hearing a motion or trial in an action. To determine if an order is final or interim/interlocutory, one must examine the order, the motion judge’s reasons for the order, the nature of proceedings giving rise to the order, and any other contextual factors that may bear on the nature of the order: Prescott & Russell (United Counties) v. David S. Laflamme Construction Inc., 2018 ONCA 495 at paras. 5-7, 10, and 14; Salewski v. Lalonde, 2017 ONCA 515 at paras. 30, 37, and 38.

[12] On the record it this appeal, it is clear that Justice Brown’s findings on the motion for interim return of property were interim. They were not binding on Master McGraw. Justice Brown determined the factual issues on the motion before her on an interim basis, because that is what she was asked to do, and that is what the law which applied to the motion before her required her to do (see in particular, Endorsement of Justice C. Brown, dated May 12, 2017, at paras. 1, 27-33, and 38).

[13] A review of Justice Brown’s Endorsement clearly shows that her findings were interim, and not final. I note in particular para. 27 of Justice Brown’s reasons, because the legal analysis she was required to apply is based on findings of fact made on a “substantial grounds” standard, not on the balance of probabilities standard required for trial.

[14] Similarly, a review of Justice Brown’s order also shows that it is interim and not final. The operative paragraph of the order regarding return of property, paragraph 2, clearly states that the property is to be delivered to the plaintiffs “until further court order or determination of the issues raised in the action.”

[15] For these reasons, Justice Brown’s findings on the motion for interim return of property are not finally determinative. That is what a trial or summary judgment motion is for. Master McGraw was correct in holding that he was not bound by Justice Brown’s findings of fact from the motion for interim return of property. It was open to him to make his own findings of fact on the motion before him (subject to appeal if he erred in law or made unreasonable findings).

(ii) Did Master McGraw err in his appreciation of the merits of the appellant’s claim?

[16] On a related point, the appellant argues that Master McGraw erred in his appreciation of the merits of the appellant’s claim. This argument rests on two prongs: First, that he was bound by Justice Brown’s findings; and second, that he erred in failing to draw an adverse inference in relation to the value of the appellant’s claim for damages for unpaid invoices based on the respondent Tatarinov’s refusal in cross-examination to answer questions relating to what the respondents were subsequently paying for new services and equipment from a different supplier (argued to be similar to the services and equipment previously supplied by LAC).

[17] I am not persuaded that Master McGraw erred in his appreciation of the merits of the appellant’s claim. I have already dealt with the issue of him not being bound by Justice Brown’s interim findings.

[18] With respect to the adverse inference issue, I hold as follows. Master McGraw correctly stated the applicable law with respect to assessing the merits of a plaintiff’s claim in considering whether to order security for costs (at paragraphs 39, 41, 56, and 60 of his reasons). I see nothing in Master McGraw’s reasons that lead me to believe that he erred in his application of the law.

[19] In my view, the issue of Master McGraw’s appreciation of the merits of the appellant’s claim is at best a question of mixed fact and law, and thus subject to the reasonableness standard of review. Further, the issue of whether to draw an adverse inference from failure to lead evidence, or from a refusal to answer a question in cross-examination, is a discretionary decision, and also subject to review on a standard of reasonableness.

[20] I find that Master McGraw’s assessment of the merits of the appellant’s claim was reasonable (Reasons of Master McGraw at paras. 54-60). He was also correct in holding that a number of issues also remain to be decided at trial (although I note that on this issue his conclusions only needed to be reasonable, as they involve issues of mixed fact and law). Further, it was in his discretion whether or not to draw an adverse inference from the refusal. I would not interfere with Master McGraw’s appreciation of the merits of LAC’s claim, and issue on which he is entitled to deference.

[21] The appellant’s arguments on both the first and second grounds of appeal I have outlined above are effectively claims that it has such a strong case that it is unlikely that it would be ordered to pay costs at the end of a trial. In my view, to the extent that the merits of a plaintiff’s case are relevant to considering whether to order security for costs, a master’s appreciation of the merits of the case is to be reviewed on appeal on a standard of reasonableness (barring a finding of an error of law). As I have outlined, Master McGraw did not commit an error of law, and his appreciation of the merits of the appellant’s claim was reasonable.

(iii) Did Master McGraw err in not relying on the ability of the individual co-plaintiff to satisfy a costs award?

[22] Lastly, the appellant argues that Master McGraw erred in paragraph 52 of his reasons in finding that the claim of the individual defendant, Ginter Baca, was sufficiently distinct from LAC’s claim that LAC should not be required to pay security for costs, because Baca could be looked to to pay a potential costs order. In making this argument, the appellant focuses on the fact that both Baca and LAC make a claim for punitive damages.

[23] Master McGraw correctly stated at paragraph 52 of his reasons the applicable legal principles in relation to not ordering security for costs when multiple plaintiffs put forward the same claim: Sadat v. Westmore Plaza Inc., 2013 ONSC 469 at paras. 35-36; see also Musicrypt Com. Inc. v. Stark, [2001] O.J. No. 1810 (ONSC) at para. 13. Indeed, the plaintiff concedes that Master McGraw correctly stated the law in paragraph 52.

[24] The difficulty I see with the appellant’s argument on this issue is that the case law relating to considering the ability of co-plaintiffs to pay a costs award is premised on the co-plaintiffs having the same (or very similar) causes of action. The reason for this is that only in circumstances of the same or very similar claims, can it be concluded that the claims of co-plaintiffs will succeed or fail together, such that there is very little likelihood that the plaintiff from whom security for costs is being sought will be ordered to pay costs and the other plaintiff(s) will not be ordered to pay costs: see cases cited in preceding paragraph.

[25] Master McGraw considered the nature of the claims put forward by Baca and LAC, and concluded that they were sufficiently distinct that the principle invoked by the appellant about joint plaintiffs was not satisfied (see his reasons at paragraph 52). I find that his conclusion on this issue was reasonable.

[26] Master McGraw’s appreciation of the distinctness of the claims of Baca and LAC was at best a question of mixed fact and law. Thus, it is subject to the reasonableness standard of review. Although there are some areas factual of overlap between the claims of Baca and LAC, there are significant area of distinctness. In particular, I note that the primary claims of Baca and LAC, as set out in paragraphs 1 and 2 of the statement of claim are legally distinct claims. Although both plaintiffs claim punitive damages in paragraph 3 of the statement of claim, the claims for punitive damages of each plaintiff are necessarily distinct, as each is dependent on the distinct claims made by Baca and LAC at paragraphs 1 and 2 of the statement of claim being proven (or some of them being proven). Thus, the claims for punitive damages are also effectively distinct claims. Master McGraw’s conclusion on this issue was reasonable, and I am not persuaded that he made any palpable or overriding error.

[27] In any event, the error that the appellant alleges on this issue (which I reject), had no impact on the outcome of the security for costs motion, as Master McGraw also concluded in paragraph 52 of his reasons that there was no evidence before him as to Baca’s ability to pay a costs award.

[28] I agree that Master McGraw was entitled to consider Baca’s ability to pay a costs award in this context. I do not see how, even if LAC had shown that its claim and Baca’s were similar enough to be considered joint claims, LAC would be entitled to rely on Baca’s purported ability to pay a costs award in the absence of evidence about Baca’s ability to pay. This is not an issue of seeking security for costs against Baca, which was not available. Rather, to the extent that LAC sought to rely on Baca’s ability to pay a costs award in the motion seeking that LAC pay security for costs, LAC bore at least an evidentiary burden to put forward some evidence of Baca’s ability to pay.

Conclusion

[29] In sum, I find that Master McGraw correctly stated the legal analysis to be applied to deciding whether security for costs should be ordered, and he applied the correct legal test. I find that his factual findings and ultimate conclusion were reasonable. The appellant has not persuaded me that he erred in law, or made any palpable and overriding error. The appeal is dismissed.

Costs

[30] Both parties provided costs outlines at the close of the hearing of the appeal. Counsel were in agreement that costs should follow the event, on a partial indemnity basis. I am in agreement that costs should follow the event on a partial indemnity basis. As the respondents prevailed on appeal, they shall have their costs on a partial indemnity basis.

[31] This leaves the issue of quantum of costs. There was a small amount of dispute about the quantum of costs. The appellant took the position that as appellant it needed to do more work to prepare for the appeal than did the respondent. On this basis the appellant argued that if it was required to pay costs, the amount of costs ordered should not exceed its own cost outline of approximately $10,000.00.

[32] I note that the costs outlines of the appellant and respondents were not significantly different, with LAC seeking partial indemnity fees in the range of $10,000.00, and the respondents seeking partial indemnity fees in the range of $13,000.00, and both sides seeking relatively limited disbursements. I note that the difference in fees is largely attributable to the respondents using a higher partial indemnity hourly rate for fees than did the appellant, for counsel of very similar years of call to the bar. The number of hours spent by all counsel for the appellant and respondents are almost identical.

[33] I disagree in principle with the appellant’s position that, in general, appellants, by virtue of their role, do more work and are entitled to more costs of an appeal than are respondents. Although the assessment of quantum of costs is necessarily case-specific, I see no reason to presume that appellants incur more costs in fees than respondents. Both parties have to review the same record, and address the same legal issues. The only area where one might routinely expect appellants to incur more costs than respondents is in disbursements, since as a practical matter appellants have primary responsibility to print and bind the record (but again, this will still have to be assessed case by case).

[34] Having said that, taking into account the factors listed in rule 57.01 of the Rules of Civil Procedure, I find that in all the circumstances, a reasonable and proportionate award of costs is $10,000.00. The appellant shall pay the respondents costs of the appeal in the amount of $10,000.00, inclusive of HST and disbursements.

Justice J. Copeland Released: September 21, 2018