BARRIE COURT FILE NO.: CV-18-787-00 DATE: 20181212 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2469908 Ontario Ltd. Plaintiff – and – Nigel Stephen Axton, 2627285 Ontario Inc., Zoltan Balint, JK Media & Development Consultations Inc., Kim Vangeloff, Zapfe Holdings Inc., Werner Frank Zapfe, Dramel Limited, Melvyn Solomon, VC Capital Management Inc., Christian Hans Meissner, Ancon Investments Inc. and Fred Rankel Defendants
Counsel: Dylan Baker, for the Plaintiff Andrea M. Habas, for the Defendants, 2627285 Ontario Inc. and Zoltan Balint
HEARD: November 20, 2018
REASONS FOR DECISION
Nature of the Motions
1The defendant, 2627285 Ontario Inc., the principal of which is Mr. Z. Balint, brings this motion for an order to discharge a certificate of pending litigation (CPL) obtained by the plaintiff against his property, 13980 Weston Road, King City, Ontario. For simplicity, I will refer to the defendant as Mr. Balint. He also requests an order that the plaintiff post security for costs of the action.
2The plaintiff, 2469908 Ontario Ltd., the principal of which is Ms. S. Calidonna resists the motion. For simplicity, I will refer to the plaintiff as Ms. Calidonna. She bought the property in 2016 but defaulted on one of the mortgages. The mortgagee proceeded by power of sale, then assigned the mortgage to another corporation that sold the property to Mr. Balint. Ms. Calidonna has commenced an action pursuant to the Fraudulent Conveyances Act, RSO 1990, c F.29, alleging that Mr. Balint, the mortgagee, and several lenders committed a fraud against her when the property was sold.
3Ms. Calidonna requests that the CPL remain in place. She also requests an injunction to restrain Mr. Balint from performing any “renovations, demolition, or alterations to the property and restraining him from selling, mortgaging, pledging, encumbering, transferring, assigning, or otherwise taking any action that would in any way whatsoever change the character of or dissipate the funds, assets or charges obtained with respect to the property selling the property”.
The Issues
4Did Ms. Calidonna make full disclosure of all of the material facts on the motion for the CPL?
5Does Ms. Calidonna have a reasonable claim to an interest in the land?
6Should the CPL be vacated?
7If not, is Ms. Calidonna entitled to the injunction?
8Should Ms. Calidonna be required to post security for costs?
The Test
9The obligation of a party to make full disclosure of all material facts when requesting an order without notice to the other side is well known. Non-disclosure of material information is a sufficient basis for discharging a CPL. (See Lio v. Jescan Leasing Inc., 2012 ONSC 7318 at para. 31)
10Section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 sets out the test for discharging a CPL. The sections relevant to this matter state that a certificate may be discharged where the party at whose instance it was issued does not have a reasonable claim to the interest in the land that was claimed or on any other grounds that is considered just.
11Aside from non-disclosure, the parties disagree on the balance of the test to be applied. The disagreement arises because Ms. Calidonna has brought her claim pursuant to the Fraudulent Conveyances Act; however, Ms. Calidonna is not a creditor of the defendants nor has she brought a main action claiming a debt upon which the fraudulent conveyance action is based.
12Mr. Balint states that in Grefford v. Fielding, 70 O.R. (3) 371, the court set out the relevant test with respect to an action under the Fraudulent Conveyances Act. It stated that in order to obtain a CPL in an action claiming to set aside an alleged fraudulent transfer before obtaining judgment in the main action and where the main action does not concern an interest in the land alleged to be fraudulently conveyed, the claimant must:
(a) satisfy the court that there is a high probability that he or she would recover judgment in the main action; (b) show that the transfer was made with the intent to defeat or delay creditors; and, (c) show that the balance of convenience favours issuing a CPL in the circumstances.
Mr. Balint states that the test to discharge a CPL is the reverse. Ms. Calidonna must show that there is a high probability that she will recover judgment and that the transfer was made with the intention to defeat or delay creditors.
13Ms. Caledonia states that in Natale v. Testa, 2018 ONSC 2823, a decision of a Master, the court set out the correct test. In order to discharge a CPL, Mr. Balint must show that there is no triable issue as to whether she has an interest in the land or it would be inequitable not to strike the CPL.
14With respect to Ms. Calidonna’s claim pursuant to the Fraudulent Conveyances Act, there is no dispute that she is not a creditor nor has she brought a main action to recover a debt. Mr. Balint states that Ms. Caledonia cannot bring herself within the statutory definition of party that can avail itself of the remedies in the Fraudulent Conveyances Act. Ms. Calidonna states that there is no jurisprudence with respect to her specific facts. Her argument is novel.
15Because Ms. Calidonna’s standing to bring an action under the Fraudulent Conveyances Act is uncertain, I will not apply the Grefford high probability test. Rather, I will consider whether there is a triable issue as to whether Ms. Calidonna has an interest in the land. I will also consider whether not striking the CPL would be inequitable.
Chronology
16In order to understand the parties’ positions, a detailed review of the chronology of events is required.
(a) March 2, 2016: Ms. Calidonna purchased the property for $3,100,000. Four mortgages were registered totalling $6,650,000, the first of which was the “Zapfe Holdings Inc. mortgage” in the amount of $2,100,000. The fourth was the “Barris mortgage” in the amount of $4,000,000. (b) November 15, 2017: The Zapfe mortgage matured. Ms. Calidonna did not pay it out. (c) December 6, 2017: Zapfe issued a statement of claim. (d) Sometime between December 16 and 18, 2017: Zapfe served a notice of sale under mortgage to all interested parties including Calidonna. The notice of sale provided that payment was to be made by January 22, 2018, failing which the property would be sold. (e) Ms. Calidonna tried to arrange financing but was unsuccessful. (f) December 22, 2017: Mr. Balint wanted to refinance his residential property. He contacted a mortgage broker, Harpeet Sethi, who referred him to Dramal Limited, a lender. He obtained loan from Dramel, the principal of which is a Mr. M. Solomon, long time counsel of a Mr. N. Axton (as alleged by Ms. Calidonna), to refinance his residential property. (g) January 22, 2018: Ms. Calidonna did not pay out the Zapfe mortgage. (h) January 26, 2018: Zapfe obtained default judgment for payment and possession. (i) In late January, Mr. Balint saw a sign on the property which stated that it was in the possession of Zapfe Holdings. All questions to be directed to Mr. C. Scalzi (solicitor). (j) Mr. Balint had several discussions with Mr. Scalzi. He learned in February that property was for sale. Mr. Scalzi directed Mr. Balint to discuss matter with Mr. Axton. (k) March 9, 2018: Torta Management Inc. (of which Mr. Balint is the principal) submitted an offer to purchase for $3,100,000. He used some of the Dramel loan to pay the down payment. Torta made the offer because 2627285 Ontario Inc., which ultimately took title, had not yet been incorporated by Mr. Balint. (l) Sometime prior to March 12, 2018, Zapfe assigned the mortage to the defendant JK Media Development and Consultations Inc. JK Media is described as Mr. Axton’s company. (m) March 12, 2018: pursuant to power of sale, JK Media signed back the offer with some new terms. Mr. Balint accepted signed back. The offer was binding with a closing date of March 29, 2018.
(The emails set out below were exhibits in the motion record for the CPL).
(n) March 26, 2018 at 9:28: Ms. Calidonna’s counsel, Mr. Y. Zhou, sent an email to Mr. Scalzi stating that Ms. Calidonna was trying to arrange financing, requesting payout statement and inquiring as to whether there was an agreement of purchase and sale. (o) March 26, 2018 at 9:35: Mr. Scalizi sent a reply email stating “the mortgage has been sold” so he could not provide information. He suggested that Mr. Axton be contacted and provided his email address, Torringtoncapitalgroup1@yahoo.ca. (p) March 26, 2018: Ms. Calidonna states that she received a notice of the assignment of the mortgage from Japfe to JK Media. (q) March 27, 2018 at 11:44 am: Sonai Thomas, counsel for Kyko, a lender, sent an email to Mr. Zhou stating “kindly advise the mortgagees that Kyko Global Inc. is prepared to lend but needs to fully comprehend the outstanding amounts. In the meantime, I understand that you will be asking Santina (Ms. Calidonna) to contact Sheldon Barris to see if he is willing to remove his umbrella charge on the property in question.” (r) March 27, 2018 at 12:06 pm: Mr. Zhou sent email stating, “My client has a serious lender. Please see email below [referring to email from Sonai Thomas]. They require the up to date payout statement from the 1st mortgagee. Please provide same ASAP.” (s) March 27 2018 at 12:38 pm: Mr. Axton, sent an email stating, “We have emailed all the parties to ask for up-to-date statements, bills and accounts so that a new mortgage statement can be completed. Even if there was financing available, how would you make title as there is $7M financing on title??” (t) At her cross-examination, Ms. Calidonna stated that she obtained a verbal commitment from Kyko to lend $4.5 million in exchange for a mortgage against only the property. She stated that the fourth mortgagee (Barris $4,000,000) was prepared to discharge his mortgage; however, she did not know whether there was any written confirmation of that from Barris. (u) March 28 2018 at 9:44 am: Mr. Zhou sent an email stating, “As you know, the lender will not advance funds until they see the payout statement from the 1st mortgagee. Please provide us with the estimate as accurate as possible so the lender will have an idea how much funds are required to pay off the 1st mortgagee. Kindly provide the above ASAP so my client can pay the 1st mortgagee right away.” (v) March 28 2018 at 10:34 am: Mr. Axton sent an email to Mr. Zhou describing some applicable bills and stating, “This is being done to assist you but we confirm that there are still no funds and no commitment from your client. There is no confidence that your client has any ability to redeem the mortgage and that this is simply a waste of time and expense. You have provided a lender Kyoto [sic] Global Inc. which does not appear to be a lender but more of a factoring lender. There is no commitment… How are you going to make title with $7M financing on the property?” (w) March 28, 2018 at 11:19 am: Ms. Thomas sent an email to Mr. Axton stating, “Regarding the financing committment, that is between Kyko and its client. We are well aware of the $7 million financing on the property. Kindly forward us the complete payout statement when available. Without it we cannot finalize our financing commitment… While I appreciate that you are still awaiting certain invoices, your prompt attention to this matter would be helpful.” (x) March 28, 2018 at 12:13 pm: Mr. Axton sent a reply email setting out a number of facts relating to the property and the appraisals that have been obtained. The email stated that, “the property [was] listed for sale on March 8, 2018 for 3,100,000 but [was] taken off the market at the request of Yi [Zhou] on March 12.” The email went on to state that Mr. Scalzi had advised that several private lenders were about to provide a commitment, then CIBC was about to provide financing but nothing was ever received.” (y) March 28, 2018 at 3:28: Ms. Thomas sent an email stating, “We look forward to receiving the full and complete payout statement at the earliest. We would like to conclude this transaction post haste.” (z) March 29, 2018 at 9:56: Mr. Zhou sent an email to Mr. Scalzi stating, “I understand that you have advised me of the assignment of the 1st mortgage on the above property and that you are no longer involved in this matter. As we have not received a payout statement from the assignee, despite our repeated requests for same, please provide us with the contact information of the solicitor acting for the assignee. We need a payout statement immediately to avoid any further damages to Ms. Calidonna.” (aa) March 29, 2018 at 4:07 pm: Mr. Axton sent an email to Mr. Zhou stating, “The list of issues relating to the property have now been satisfied and the property is ready to be sold. We have heard nothing from you confirming the receipt of funds in your trust account or any financing commitment to redeem the first mortgage so we can only conclude that you have nothing.” (bb) March 29, 2018: JK Media extended the original Balint closing date to April 3, 2018 on terms to allow for Mr. Balint’s financing. (cc) April 2, 2018 at 9:04 am: Mr. Zhou sent an email to Mr. Axton stating, “Please see the letter from the lender’s lawyer requesting again for the payout statement. Ms. Thomas has advised you on several occasions that her client requires a payout statement from the 1st mortgagee before they can advance the funds. Please provide the said payout statement ASAP without further delay to avoid further damages.” (dd) April 2, 2018 at 10:14 am: Mr. Axton sent an email, presumably to Mr. Zhou although this name is not on the copy of the email, stating, “we’ve asked you on repeated occasions to provide confirmation of funds in your trust account or an unconditional commitment for financing. This will confirm that your client has the ability to redeem and that this is not another waste of time with your client which will only increase the substantial costs of the file. To date we have received nothing. We have advised you that the approximate number for redemption will be in the order of $2.7M and that the parties who have outstanding accounts for the property tax has [sic] been asked to submit their bills. As the bills arrived, we have updated you with the amounts. You have had the information needed to move ahead with the financing commitment if indeed there is such a commitment. Whether the final redemption amount is out by a few thousand dollars will make no difference. As we have previously advised you, there is zero confidence in your client’s ability to refinance the property. There have already been broken promises to refinance over the last few months, the latest being the CIBC commitment which was supposed to be forthcoming in February. You have now submitted a letter from your “lender” which confirms that there is no commitment. The letter only states that your “lender” is prepared to make a financing commitment. We have no idea what the terms of the commitment might be nor do we know if the commitment is sufficient to pay off the first mortgage, whether it is unconditional, what date it will close for how you will make title with the $3M Barris 4th mortgage on title… Your client borrowed $2.1M and walked away from the obligations in 2017. Did you forget the unpaid interest, the unpaid taxes, no insurance, the $145K fire in the main house, the mould in the main house, the ESA electrical violations and the $100K of legal costs that your client has forced the first mortgagee to expend.” (ee) April 2, 2018 at 12:40: Mr. Zhou sent an email, (presumably to Mr. Axton although his name was not on the copy) stating, “I’ve advised you on previous occasions that I do not have the funds as the lender requires a payout statement from the 1st mortgagee. Ms. Thomas also confirms same in her various emails to you. Please provide the payout statements ASAP with supporting documents as per the request from Ms. Thomas to avoid any further damages.” (ff) April 2, 2018 at 4:48 pm: Mr. Axton sent an email to Mr. Zhou setting out the mortgage redemption amount, $2,697,822.55 as of March 29, 2018. Torrington/Mr. Axton also set out a number of other items to be added and stated, “This would be an additional amount making the total $2,702,060.05 plus $508.50 less surveyors allowance of $2,500 plus per diem rates. It is the same 2.7m number that you were provided with last week.” (gg) April 2, 2018 at 4:58 pm: Mr. Zhou sent an email to Ms. Thomas which stated, “Please see the payout statement below.” (hh) April 3, 2018 at 9:44 am: The transfer of the property from JK Media to 2627285 Ontario Inc. (Mr. Balint’s company) was registered. (ii) April 6, 2018: Ms. Calidonna registered caution on title. (jj) May 23, 2018: Ms. Calidonna brought an ex parte motion for a CPL before Eberhard J. based on appraisal from Diane Anderson which valued property at $5,760. She alleged that that sale was improvident and a fraud had occurred. The order for CPL was granted. (kk) October 9, 2018: Mr. Balint brought a motion for an order striking out all references to the Anderson appraisal contained in Ms. Calidonna’s affidavit in support of the motion for the CPL. Boswell J. granted the order. In his reasons, he stated that the Anderson appraisal was not prepared for Ms. Calidonna but rather for a mortgage corporation which is not a party to these proceedings. An examination was arranged for Ms. Anderson but she refused to attend. She stated that the appraisal had been used without her permission and for an unauthorized purpose. Boswell J. stated that Rule 34.15 of the Rules of Civil Procedure was to be construed liberally. The appraisal was expert opinion evidence and could not be the evidence of the affiant (Ms. Calidonna). He allowed the motion and ordered costs in favour of Mr. Balint in the amount of $3000 payable within 30 days. (ll) Ms. Calidonna has not paid the costs.
Did Ms. Calidonna make full disclosure of all material facts on the motion for the CPL?
Mr. Balint’s Position
17Mr. Balint states that in Ms. Calidonna’s supporting affidavit, she alleges that the mortgagee’s sale of the property to him for the amount of $3,100,000 was improvident. She relied on an appraisal prepared by Diane Anderson which valued the property at $5,760,000. This appraisal had been prepared for a different purpose and was used without the author’s permission. Ms. Calidonna failed to disclose that she had also purchased the property for $3,100,000 two years earlier. While the property included a residence and other buildings, it had remained vacant up until the time when it was sold pursuant to the power of sale. A fire had occurred inside the residence.
Ms. Calidonna’s Position
18Ms. Calidonna does not address the fact that she failed to disclose to the CPL judge that she purchased the property for $3,100,000 two years earlier. She also does not address the fact that she used the Anderson appraisal without the author’s permission.
Analysis
19The issue with the Anderson appraisal came to Mr. Balint’s attention when his counsel tried to examine Ms. Anderson. She refused to attend an examination and stated that the appraisal had been performed for a different party for a different purpose. She did not consent to Ms. Calidonna’s use of it. Ms. Calidonna had no other evidence with respect to the property’s value aside from her own belief that another property down the road had sold for much more. She did not know any of the particulars of this property.
20Furthermore, in Ms. Calidonna’s supporting affidavit, she set out a novel legal argument. She stated that the transfer was a fraudulent conveyance; however, she is not a creditor and cannot claim that the mortgagee was a debtor. She cannot claim that the mortgagee transferred the property to Mr. Balint to put it out of her reach to satisfy a debt. Section 2 of the Fraudulent Conveyances Act states:
Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereinafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and unlawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. [Emphasis added]
21Ms. Calidonna takes the position that although she is not a creditor (and in fact was a debtor of the mortgagee) she fits within the category of “or others” and can bring an action pursuant to the Fraudulent Conveyances Act. There is no jurisprudence to support this.
22Furthermore, Ms. Calidonna failed to draw the motion judge’s attention to section 3 of the Act which states:
Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.
Conclusion
23Based on Ms. Anderson’s appraisal which was improperly used, Ms. Calidonna’s failure to state that she had paid the same price for the land as the sale price and her failure to state that her position that she could bring an action pursuant to the Fraudulent Conveyances Act was novel, the CPL judge was led to conclude that there was a triable issue with respect to Ms. Calidonna’s interest in the land [1].
24If the CPL motion judge had known that the Anderson appraisal could not be relied upon, that Ms. Caledonia had bought the property for the same price as the purchase price paid by Mr. Balint and that her standing to bring an action under the Fraudulent Conveyances Act was a novel argument, the CPL motion judge’s decision might have been different.
25I find that Ms. Calidonna failed to make full disclosure of all material facts on the motion for the CPL and in fact used an unauthorized appraisal. For these reasons, the CPL shall be discharged. In case I have erred, I will go on to determine the next issue.
Does Ms. Calidonna have a reasonable claim to the interest in the land?
Ms. Calidonna’s Position
26Ms. Calidonna states that a fraud has occurred. Mr. Axton is a disbarred lawyer. He has been convicted of fraud in the past. He is somehow connected to JK Media. All of the communication went through him. He should have advised Mr. Zhou that there was an agreement of purchase and sale when Mr. Zhou requested the discharge statement. It was not provided until the afternoon before the transfer was registered. Ms. Calidonna states that her right to redeem was thwarted. The sale was a secret.
27She also states that Mr. Balint’s evidence that he did not know Mr. Axton and Mr. Solomon (of Dramel) is not credible. Several Ontario Superior Court of Justice decisions show that Mr. Solomon has acted for Mr. Axton in the past. They are long term associates. Mr. Balint obtained a mortgage from Dramel six days after the notice of sale was served. This is too much of a coincidence. Although Mr. Balint states that it was to refinance his residential property, one of the relevant mortgages was not discharged until well past the time when it was due. Ms. Calidonna speculates that Mr. Balint obtained this mortgage so that he could make an offer to purchase the property.
28When Mr. Balint made the offer, it was not to JK Media. It was to Torrington [2]. When the offer was signed back, JK Media was inserted as the vendor. Ms. Calidonna states that this should have indicated to Mr. Balint that “something fishy was going on.” He was not alarmed that he was purchasing from JK Media, not Torrington. Mr. Balint borrowed more money from Dramel to finance the purchase.
29Ms. Calidonna states that she did not receive notice of the assignment of the Japfe mortgage to JK Media until March 26, 2018. She relies on Lee v. Korea Exchange Bank of Canada, 2009 ONCA 1119 which states that a new assignee has to serve another notice of sale if the assignee is not mentioned in the first notice, otherwise a mortgagor will not know who to contact. She states that the failure to do so raises a title issue.
30Ms. Calidonna further states that the property was listed for sale by Weiss Realty Ltd. for only one day, even though there was already an agreement of purchase and sale. The listing was suspended the next day. Mr. Weiss stated in an email that the listing was suspended because the “mortgagor is apparently trying to refinance the property and that the property being listed would be detrimental to the mortgagee’s efforts.” Ms. Calidonna states that this is a lie. The listing was suspended because there was an agreement of purchase and sale. Nevertheless, Mr. Weiss was paid a commission of $210,000 including HST for the one day listing [3].
31In addition, although the costs awarded for the default proceedings were slightly under $15,000, Mr. Scalzi’s legal fees relating to this matter were $87,058 [4].
32There was a fire in the house on the property prior to the transfer. Ms. Calidonna states that the cost to remediate the damage was $3,800 [5] whereas Mr. Scalzi stated that it would be $140,000.
33Ms. Calidonna states that all of this indicates that a fraud was perpetrated on her and that Mr. Balint was involved in it. She has an interest in the land. The CPL should not be discharged.
Analysis
34Mr. Balint states in his affidavit that in late 2017, he used a mortgage broker, Harpreet Sethi, to refinance his residential property. Mr. Sethi found a prospective lender which was Dramel. Mr. Balint had no association with Dramel prior to this. He obtained a loan from Dramel to refinance his residential property. On December 22, 2017, he paid off all of the existing mortgages and registered a first mortgage in favour of Dramel for $2,800,000. This took place weeks before he was aware that the property in issue could or would be up for sale.
35Mr. Balint further states that once the agreement of purchase and sale was firm, and given the short closing date, he needed to borrow all of the purchase money. Accordingly, he could not use a financial institution. Again, Mr. Sethi was able to locate another lender, VC Capital Management Inc. that provided him with some of the financing. A friend introduced him to Ancon Investments Inc., which also provided him with some of the financing. Dramel agreed to provide additional financing. Using the financing from these three entities, Mr. Balint was able to purchase the property.
36Mr. Balint was not cross-examined on his affidavits. Accordingly, his evidence is uncontroverted.
37Ms. Calidonna’s assertion that Mr. Balint had notice of a fraud, or was privy to it, is mere speculation. At cross-examination, when his evidence was put to her that prior to seeing the sign on the property, he did not know any of the other parties, Ms. Calidonna stated that she had no evidence to the contrary. She stated that she had no information that Mr. Balint knew or had spoken to the other parties before late January. When questioned as to how Mr. Balint had participated in a scheme, her reply was that Mr. Balint “went into a property that he was quite aware of who the people are and bought something that he knew was stolen.” In response to a question as to how Ms. Calidonna knew that Mr. Balint had done something wrong, she stated, “You try to figure it out because I know that he did it.”
38Ms. Calidonna has raised some significant questions with respect to the failure to issue a notice of sale identifying JK Media as the assignee of the mortgage, the timing of Mr. Axton’s providing the discharge statement, the very large commission paid to Mr. Weiss for a one day listing and the surprising amount of legal fees charged [6].
39With respect to the failure to issue a notice of sale identifying J K Media as the assignee of the mortgage, I note that in Lee v. Korea Exchange Bank of Canada, 2009 ONCA 1119, the court quoted section 35 of the Mortgages Act which provides as follows:
Where notice has been given in professed compliance with this Part…the title of the purchaser is not liable to be impeached on the ground that the provisions of this Part...and the provisions of this Part respecting notice, have not been complied with, but any person damnified thereby has his remedy against the person exercising the power of sale.
40According to s. 35, Ms. Calidonna may not impeach Mr. Balint’s title to the property based on JK Media’s failure to issue a notice of sale identifying itself as the assignee. Her claim with respect to a failure to comply with the Mortgages Act is against JK Media and possibly others, not Mr. Balint. Ms. Calidonna was served with this motion on July 4, 2018. It was heard on November 20, 2018. She had over three months to obtain evidence to support her allegations that Mr. Balint was involved in a fraud regarding his purchase of the property. She has provided nothing but thin speculation. There is no reliable evidence that Mr. Balint knew about or was involved in any of this. Mr. Balint states that he was a bona fide purchaser for value without notice. He was not cross-examined on his affidavit. Aside from speculation, his evidence is uncontroverted.
Conclusion
41Given the above, I find that Ms. Calidonna does not have a reasonable claim to the interest in the land. The CPL shall be discharged.
Should Ms. Calidonna be required to post security for costs?
42Mr. Balint requests that Ms. Calidonna post security for costs in the amount of $100,000. Counsel for Mr. Balint stated that Ms. Calidonna’s corporation, the plaintiff, is a shell company. It has no assets.
The Test
43The applicable section of Rule 56.01 of the Rules of Civil Procedure states that on a motion by a defendant, the court may make such order for security for costs as is just where it appears that (c) the defendant has an order against the plaintiff for costs that remains unpaid and (d) the plaintiff is a corporation and there is good reason to believe that it has insufficient assets in Ontario to pay the costs of the defendant.
44According to 2179548 Ontario Inc. v. 2467925 Ontario Inc., 2017 ONSC 469, a plaintiff must make complete and accurate disclosure as to the financial ability of its shareholders to post security. A bare assertion that no funds are available will be inadequate.
45According to Morton v. Canada (Attorney General), 75 O.R. (3d) 63 (ONSC) para 32, a plaintiff claiming impecuniosity must provide full financial disclosure including, “…the amount and source of all income; a description of all assets (including values); a list of all liabilities and other significant expenses; an indication of the extent of the ability to borrow funds…”
46According to Shuter et al. v. Toronto Dominion Bank et al. para 76, the plaintiff is required to provide “…full supporting documentation for each category where available or an explanation where not available. At the very least, this would require an individual plaintiff to submit his most recent tax return, complete banking records and records attesting to income and expenses, and a corporation to submit its last financial statement and current financial projections.”
Analysis
47I am advised that the defendant has a costs order against the plaintiff in the amount of $3,000 regarding the motion before Boswell J. which has not yet been paid.
48Ms. Calidonna has acknowledged that the plaintiff company does not have sufficient assets in Ontario to pay Mr. Balint’s costs. As noted above, she is the sole shareholder. With respect to Ms. Calidonna’s financial ability to post security, she made only a bare assertion that she is a divorced, single mother and cannot afford to pay security for costs. This is all of the information that she provided.
49Counsel for Mr. Balint stated that at the cross-examination of Ms. Calidonna held on October 17, 2018, counsel requested tax returns, bank statements, information about three other companies of which Ms. Calidonna is a principal and a list of assets. Ms. Calidonna refused to produce these documents. Furthermore, she was questioned about a property, 4251Kirby Road, Vaughan that is owned by 1352579 Ontario Ltd., of which she is the sole officer and director. The property is her residence. An appraisal states that this property is worth $6,500,000. Ms. Calidonna stated that the mortgages on this property total approximately $4,500,000. Therefore, the equity in the property is approximately $1,750,000. In addition, Ms. Calidonna receives a salary of $100,000 per year and will continue to receive it for the next two years.
50Counsel for Mr. Balint submits that Ms. Calidonna has not proved that she is impecunious. In fact, she has access to an asset in order to pay security for costs. Furthermore, she was cross-examined on her request for the injunction. Counsel stated that damages could be awarded against her if she was unsuccessful. She replied by stating that if they were, she would find a way to pay them. This is inconsistent with her position that she cannot pay security for costs.
51Counsel for Ms. Calidonna stated that more time was needed to obtain financial statements for Ms. Calidonna’s company; however, there is no evidence that an adjournment was requested. No explanation was offered as to why personal income tax returns and bank statements were not provided. Counsel acknowledged that there was inadequate financial disclosure with respect to impecuniosity. He stated that pursuant to Caja Paraguay de Jubilaciones y Pensiones del Personal de Itaipu Binacional v. Garcia Obregon, 2017 ONSC 1900, there is no prima facie right to security for costs. An inquiry is triggered. Ms. Calidonna has clearly been wronged. Forcing her to post $100,000 for security would have the effect of forcing her to discontinue the case. The case should be determined on its merits.
Conclusion
52The corporate plaintiff has no assets to satisfy a judgment. There is an outstanding costs award against it. Because Ms. Calidonna, as the sole shareholder, has made no financial disclosure, I find that she has not proved that she is impecunious. Based on her evidence on cross-examination with respect to the value of her residence, the Kirby Road property, and the related equity, it appears that she has access to an asset which would allow her to pay security for costs. It also appears that an order requiring her to pay security would not force her to discontinue the action. Therefore, it is not necessary for me to go on to consider the merits of the action.
53Mr. Balint requests that Ms. Calidonna pay security of $95,767.50 for fees, disbursements and HST up to and including examinations for discovery. This is set out in a bill of costs. Counsel estimates that fees of $22,750 on a partial indemnity basis have already been incurred. Three quarters of this amount relates to this motion. Another $7,000 is estimated for production of documents and review as well as $35,000 for examinations for discovery. Disbursements are estimated at $20,000 including transcripts and discovery appointments.
54I find that the amounts estimated for production and review of documents, examinations and disbursements are excessive. In these circumstances, I find that an appropriate amount for Ms. Calidonna to post for security for costs is $75,000.
Costs of this Motion
55Mr. Balint is the successful party. Both parties filed voluminous materials. Mr. Balint filed a motion record comprised of two volumes, a supplementary motion record, a factum, a compendium and a book of authorities. All of this was 6” deep. By comparison, Ms. Calidonna filed a motion record, a supplementary affidavit and a factum. She also relied on the materials filed in support of the motion for the CPL comprising a motion record, a factum and a book of authorities. All of this was 3.5” deep. Counsel for Mr. Balint requests fees of $17,500 plus $5,000 for the attendance on the motion. It was a full day. Disbursements totalling $8,007.31 including tax are set out in detail. The total amount requested is $33,432.31.
56Counsel’s partial indemnity rate, $350, is reasonable given her 33 years of experience. I find that $17,500 is not an unreasonable amount, considering the materials that were prepared and the fact that Ms. Calidonna was cross-examined. Counsel’s $5,000 attendance fee is high, considering that approximately six hours was required for the motion.
57The court’s discretion to fix costs is found in s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C43. Rule 57.01 of the Rules of Civil Procedure sets out factors that the court should consider in assessing and fixing costs.
58A costs award should reflect what the court views as a fair and reasonable amount to be paid by the unsuccessful party rather than an exact measure of the actual costs incurred by the successful litigant. See Zesta Engineering Ltd. v. Cloutier, [2002] O.J. No. 4495 (C.A.).
59Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness. See Boucher v. Public Accountants, 71 O.R. (3d) 291.
60In my view, a fair, reasonable and proportionate costs award for this motion is $25,000, all inclusive, which the plaintiff shall pay to the defendants 2627285 Ontario Inc. and Zoltan Balint within 30 days. The plaintiff shall not take a further step in the proceedings against these defendants until these costs are paid.
Madam Justice M.E. Vallee
Released: December 12, 2018
[1] Because the CPL motion was ex parte, the motion judge did not have Mr. Balint’s evidence that he had no prior association with JK Media, Mr. Axton, Mr. Solomon (except for the December loan for his residence from Dramel) or any of the other defendants. The motion judge did not have Mr. Balint’s evidence that he was a bona fide purchaser for value without notice. Ms. Calidonna did not alert the motion judge to the possibility that this would be Mr. Balint’s position. [2] Which was blacked out on the accepted offer. [3] This is confirmed in a letter from Weiss Realty Ltd. to JK, dated March 28, 2018. [4] This is confirmed on the mortgage payout statement dated March 29, 2018. [5] Ms. Calidonna provided a hand-written estimate to rebuild the fireplace in this amount. [6] I am advised that Ms. Calidonna has a remedy regarding the commission and the fees. She may attend at an assessment and possibly receive reimbursement.