COURT FILE NO.: CV-18-00077411-0000
DATE: 20190306
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1778133 Ontario Inc., Plaintiff
AND
Laurin Contracting Ltd., Defendant
BEFORE: Justice R. Ryan Bell
COUNSEL: Leonard Levencrown, for the Plaintiff
Charlotte Watson, for the Defendant
HEARD: March 1, 2019
ENDORSEMENT
[1] 1778133 Ontario Inc., operating as Ryan’s Maintenance Inc., and Laurin Contracting Ltd. are embroiled in a dispute over the performance of a contract relating to a project at 4th Canadian Division Support Base, Petawawa. Ryan’s Maintenance alleges misrepresentation and negligence on the part of Laurin Contracting and claims damages of $1,366,410.00. Laurin Contracting alleges breach of contract, negligent performance of contract, and delay on the part of Ryan’s Maintenance. Laurin Contracting counterclaims for damages of $665,521.20.
[2] Laurin Contracting moves for an order for security for costs pursuant to Rule 56.01(1)(d) of the Rules of Civil Procedure. Rule 56.01(1)(d) provides:
The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.
[3] Ryan’s Maintenance opposes the motion for two reasons. First, it argues that Laurin Contracting has failed to discharge its burden under Rule 56.01(1)(d) as to the insufficiency of the assets of Ryan’s Maintenance. Second, Ryan’s Maintenance asserts that if I find that security for costs is appropriate, Eastway Contracting Inc., which has stated that it is “prepared to be responsible for any costs that may be awarded in this action,” should be permitted to post a bond to secure a costs award against Ryan’s Maintenance.
[4] Under Rule 56.01(1)(d) the moving party does not have to establish that the corporate plaintiff has insufficient assets to pay costs; all that need be established is that there is “good reason to believe” that this is the case. As Lang J.A. stated in City Commercial Realty (Canada) Ltd. v. Bakich, “[e]ven though the onus is a reduced one, the moving party must still provide enough information about the corporation to raise a belief of insufficiency that goes beyond mere conjecture, hunch, or speculation” ([2005] O.J. No. 6443 (C.A.)).
[5] Laurin Contracting has established that there is good reason to believe that Ryan’s Maintenance has insufficient assets in Ontario to pay the costs of the defendant. Indeed, the evidence is that Ryan’s Maintenance does not have any assets in Ontario with which to pay costs. By letter dated August 22, 2018, the president of Ryan’s Maintenance wrote to Laurin Contracting to advise that effective immediately, all amounts due and payable to Ryan’s Maintenance had been assigned to Eastway Contracting, and that all future payments should be directed to Eastway Contracting. The affidavit of Joanne Martin, vice president of Eastway Contracting, confirms that Eastway Contracting purchased all of the assets of Ryan’s Maintenance.
[6] This evidence is not mere conjecture or speculation; it is concrete evidence that the assets and receivables of Ryan’s Maintenance have been sold to Eastway Contracting. Laurin Contracting has discharged its burden under Rule 56.01(1)(d).
[7] The onus therefore shifts to Ryan’s Maintenance to demonstrate either: (i) it has sufficient assets in Ontario; or (ii) it is impecunious, and an injustice would result if it were not allowed to proceed with its action (Printing Circles Inc. v. Compass Group Canada Ltd. (2007), 2007 57095 (ON SC), 88 O.R. (3d) 685 (S.C.J.), at para. 6).
[8] Ryan’s Maintenance does not argue that it has sufficient assets in Ontario, nor does it say that it is impecunious. As to the latter point, given Ms. Martin’s affidavit, it is clear that Ryan’s Maintenance can look to Eastway Contracting to raise the money to pay costs. Ryan’s Maintenance has access to resources. For these reasons, I find that justice requires that the costs of Laurin Contracting in this action, on a partial indemnity basis, be secured.
[9] The issue is whether the court should make an order that Eastway Contracting post security for the costs of Laurin Contracting in this litigation, litigation to which Eastway Contracting is a stranger.
[10] Ryan’s Maintenance has referred me to the decision of Corbett J. in Printing Circles, while Laurin Contracting relies on Master Albert’s decision in Trec Total Roadway v. Jegel and MTO, [2004] O.J. No. 786 (S.C.J.). In Printing Circles, the plaintiff did not have sufficient assets in Ontario to pay costs. The company’s principal offered to provide an undertaking to pay costs ordered against the plaintiff if the plaintiff failed to pay those costs. After a detailed review of the authorities, Corbett J. concluded that the Rules of Civil Procedure would permit the court to enforce the proposed undertaking within the current proceeding, without the necessity of adding the principal shareholder as a party and without commencing a separate proceeding against her to enforce her undertaking. Corbett J. also concluded that the proposed undertaking was a practical and desirable way to address the issue of security of costs in this and other cases involving small private companies that “may not have ready access to reliable financial information to establish their ability to pay costs” (Printing Circles, at paras. 17-19). In the result, Corbett J. ordered that the plaintiff post security for costs, and that the security could be satisfied by the principal giving her personal undertaking to pay any costs awarded against the plaintiff which the plaintiff did not pay. The undertaking was itself a form of security for costs, and not in lieu of security (Printing Circles, at para. 41).
[11] This case is distinguishable from the circumstances before Corbett J. in Printing Circles. The plaintiff in Printing Circles was an active business with equipment and employees; the concern was that a small private company might not have ready access to reliable financial information to establish its ability to pay costs. The undertaking proffered was in the nature of a personal guarantee from the principal of the plaintiff.
[12] By contrast, there is no evidence that Ryan’s Maintenance is an active business or that it has any ability to pay costs; all of the evidence is to the contrary. Ms. Martin’s sworn statement that Eastway Contracting is prepared to be responsible for any costs that may be awarded in the action is not a personal guarantee; rather, it is a statement made on behalf of a corporate non-party. I have been provided with no information as to the relationship, if any, between Ryan’s Maintenance and Eastway Contracting.
[13] In1056470 Ontario Inc. v. Goh (1997), 1997 12255 (ON SC), 34 O.R. (3d) 92 (Ct. J. (Gen. Div.)), Borins J., as he then was, allowed an appeal from the decision of the master ordering security for costs pursuant to Rule 56.01(1)(d). Borins J. concluded that the master had made two errors in principle. First, having found that the plaintiff by counterclaim was impecunious and that its claim was not devoid of merit, it should not have been ordered to provide security. Second, Borins J. held that it was an error to order a non-party to the litigation to provide his personal undertaking to pay the costs of the counterclaim should it be dismissed. Borins J. referred to the principle that, in the absence of exceptional circumstances, the court should not order a non-party to pay the costs of an unsuccessful party. At the same time, Borins J. recognized that “in an appropriate case, where a non-party volunteers to provide a personal undertaking to pay a party’s costs to satisfy an order for security for costs, and this is acceptable to the parties and the court, the court can make the appropriate order (1056470 Ontario, at para. **).
[14] In Trec Total Roadway Engineering, Master Albert referred to 1056470 Ontario; however, in Trec, the defendants were not prepared to accept the unsecured undertaking of the non-party shareholders. Master Albert found that the case was not an appropriate one to exercise discretion and require an undertaking from non-parties in place of actual security (Trec, at paras. 10-14).
[15] In this case, the offer made by Eastway Construction, a non-party to the action, is not acceptable to Laurin Contracting, nor is it acceptable to the court. Eastway Construction could not be held responsible for Ryan Maintenance’s costs at trial and there are no exceptional circumstances warranting an order that it undertake to do so in the form of an order for security for costs. The circumstances in this case are not the same as those in Print Circles. Eastway Construction, the corporate purchaser of assets, stands in a far different position in relation to Ryan’s Maintenance than did the principal of Printing Circles, the corporation’s “directing mind.” The information provided about Eastway Construction is scant. I conclude that this is not an appropriate case to order a non-party to the litigation to post security for costs.
[16] Laurin Contracting seeks security for its partial indemnity costs through trial, inclusive of disbursements, in the amount of $38,330.83. Having reviewed the Bill of Costs filed by Laurin Contracting, and the affidavit of counsel estimating preparation for and attendance on five days of discovery and five days of trial, I accept this amount as being very reasonable.
[17] There remain significant steps to be taken in this action. In my view, this is an appropriate case to order the payment of costs on an instalment basis. I therefore order Ryan’s Maintenance to post security for the costs of Laurin Contracting through the discovery phase of the proceeding in the amount of $19,165.00 within 30 days of this order. An additional amount of $19,165.00 shall be posted within 30 days of the action being set down for trial. The security shall be posted in the form of cash or an irrevocable letter of credit from a Canadian chartered bank.
[18] The parties are encouraged to agree on the issue of costs of the motion. In the event that the parties are unable to agree, they may make brief written submissions. Laurin Contracting shall deliver its costs submissions by March 22, 2019. Ryan’s Maintenance shall file deliver its responding costs submissions by April 3, 2019. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
Justice Robyn M. Ryan Bell
Date: March 8, 2019
COURT FILE NO.: CV-18-00077411-0000
DATE: 20190306
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: 1778133 Ontario Inc., Plaintiff,
AND
Laurin Contracting Ltd., Defendant,
BEFORE: Justice R. Ryan Bell
COUNSEL: Leonard Levencrown, for the Plaintiff
Charlotte Watson, for the Defendant
ENDORSEMENT
Released: March 8, 2019