Court File and Parties
COURT FILE NO.: CV-14-49625-00
MOTION HEARD: 20191024
REASONS RELEASED: 20191219
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
1st AMBUPORT INC. Plaintiff
- and-
CASEY MCNAB, COMMUNITY PATIENT TRANSFER GROUP INC.; NIAGARA PATIENT TRANSFER INC.; NIAGARA ON THE LAKE TRANSIT; MOHAWK SHARED SERVICES INC. o/a MOHAWK SUPPLY CHAIN SERVICES Defendants
BEFORE: MASTER M.P. McGRAW
COUNSEL: K.J. McKenzie -for the Plaintiff
A. Lasani -for the Defendant Mohawk Shared Services Inc. o/a Mohawk Supply Chain Services (“MSSI”)
J. McNulty -for the Defendants Casey McNab, Community Patient Transfer Group Inc. and Niagara Patient Transfer Inc. (the “McNab Defendants”)
REASONS RELEASED: December 19, 2019
Reasons for Endorsement
I. Overview
[1] The Plaintiff brings a motion to set aside the Order of the Registrar Dismissing Action For Delay dated March 11, 2019 (the “Dismissal Order”). MSSI and the McNab Defendants (collectively, the “Defendants”) oppose the motion and MSSI brings a cross-motion for security for costs if the Dismissal Order is set aside.
II. Background
[2] The Plaintiff and the Defendant Community Patient Transfer Group Inc. (“CPTG”) provide non-emergency patient transfer services. On December 29, 2011, MSSI, as contracting agent for 16 hospitals, posted a Request For Proposals (“RFP”) for the provision of non-emergency patient transfer services in the following Local Health Integrated Networks (“LHIN”): 3 (Waterloo-Wellington); 4 (Hamilton, Niagara, Haldimand, Brant); and 7 (Toronto Central). Both the Plaintiff and CPTG submitted tenders.
[3] CPTG alleges that it agreed to include the Plaintiff as a subcontracting entity in its tender as a primary to LHIN 7 and third backup to LHIN 3. CPTG was awarded a contract for 70% of the volume for LHIN 4 (the “Contract”) but was unsuccessful for LHIN7 and LHIN3. The Plaintiff was unsuccessful in its own tender.
[4] The Plaintiff alleges that the Defendant Casey McNab, the principal of CPTG and the Defendant Niagara Patient Transfer Inc., asked the Plaintiff to join a group comprised of 4 other patient transfer providers to respond to the RFP as equal operational partners. The Plaintiff further alleges that Mr. McNab submitted the group’s proposal without the members having reviewed it, did not advise the Plaintiff that MSSI was awarded the Contract and unilaterally incorporated the provider group as CPTG to service the Contract.
[5] The Plaintiff subsequently provided services for the Contract to CPTG. The Plaintiff states that it did so as a partner. CPTG alleges that the Plaintiff did so as a subcontractor and that CPTG ultimately terminated this relationship as a result of complaints it received about the Plaintiff.
[6] The Plaintiff commenced this action by Statement of Claim issued on March 10, 2014 in Barrie, Ontario. The Plaintiff claims damages of $2,150,000 for breach of contract, interference with economic relations, unjust enrichment, quantum meruit, oppression and conspiracy. MSSI delivered its Statement of Defence and Crossclaim on April 22, 2014 and CPTG delivered its Statement of Defence and Defence to Crossclaim on July 2, 2014.
[7] By Order of Turnbull J. dated November 2, 2014, granted on consent, this action was transferred from Barrie to Hamilton. As of May 26, 2015, this action was permanently transferred to Hamilton.
[8] Until receiving the Dismissal Order on March 12, 2019, Plaintiff’s counsel did not contact Defendants’ counsel and no formal steps were taken in this litigation. The Plaintiff brought this motion on March 26, 2019.
III. The Law and Analysis
Motion To Set Aside Dismissal Order
[9] Rule 48.14 states:
(1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):
- The action has not been set down for trial or terminated by any means by the fifth anniversary of the commencement of the action.
(10) The dismissal of an action under subrule (1) may be set aside under rule 37.14.
[10] Rule 37.14 of the Rules of Civil Procedure states:
(1) A party or other person who,
(c) is affected by an order of a registrar,
may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.
(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.
[11] Master Dash (as he then was) set out the four (4) factors which the court must consider when determining whether to exercise its discretion to set aside a Registrar’s dismissal order in Reid v. Dow Corning Corp., [2001] O.J. No. 2365 (S.C.J.):
“1.Explanation of the Litigation Delay: The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial as set out in the status notice. She must satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why. For example the complexities of the case and the number of parties may have required significantly more time to move the action toward trial, or the delay was caused by interlocutory matters or appeals. The plaintiff could explain that the action was stalled due to the inattention or negligence of her solicitors which was contrary to her own instructions or expectations. It is absolutely essential that the plaintiff lead satisfactory evidence that she personally always intended the action to proceed to trial without delay, that she did not assent to the delay, and that she always reasonably assumed it was so proceeding or made appropriate inquiries of her solicitors. If either the solicitor or the client made a deliberate decision not to advance the litigation toward trial then the motion to set aside the dismissal will fail.
2.Inadvertence in Missing the Deadline: The plaintiff or her solicitor must lead satisfactory evidence to explain that they always intended to set the action down within the time limit set out in the status notice, or request a status hearing, but failed to do so through inadvertence. In other words the penultimate dismissal order was made as a result of inadvertence.
3.The Motion is Brought Promptly: The plaintiff must demonstrate that she moved forthwith to set aside the dismissal order as soon as the order came to her attention.
4.No Prejudice to the Defendant: The plaintiff must convince the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiff's delay or as a result of steps taken following the dismissal of the action. The court takes note that witnesses' memories generally tend to fade over time and that sometime it is difficult to locate witnesses or documents. However to bar the plaintiff from proceeding with her action on the ground of prejudice, the defendant must lead evidence of actual prejudice. This might include evidence of specified documents lost over time, or destroyed following a dismissal, or of specific witnesses who have died, or have disappeared and the defendant has been unable to locate them with due diligence. While litigation is outstanding the defendants must take care to obtain and preserve evidence.” (Reid at para. 41)
[12] The Plaintiff is not required to satisfy each of the 4 factors. Rather than applying a rigid test, the court is required to take a contextual approach considering and weighing all relevant factors to determine the order that is just in the circumstances of the particular case (Scaini v. Prochnicki, 2007 ONCA 63 at paras. 21-28). In Habib v. Mucaj, 2012 ONCA 880, the Court of Appeal stated:
“[5] There are four well established factors to consider when deciding to set aside an order to dismiss an action: (i) explanation of the litigation delay - a deliberate decision not to advance the litigation will usually be fatal; (ii) inadvertence in missing the deadline - the intention always was to set the action down within the time limit; (iii) the motion is brought promptly - as soon as possible after the order came to the party's attention; and (iv) no prejudice to the defendant - the prejudice must be significant and arise out of the delay: Reid v. Dow Corning Corp. (2001), 11 C.P.C. (5th) 80 (Ont. Div. Crt.).
[6] No one factor is necessarily decisive of the issue. Rather, a "contextual" approach is required where the court weighs all relevant considerations to determine the result that is just. …”
[13] The Court of Appeal has provided the following guidance with respect to the balance between having matters determined on their merits and having them tried expeditiously:
“Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.” (Marché d'Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (O.C.A.)at para. 34)
[14] Rule 48.14 was amended as of January 1, 2015 to provide that the Registrar shall dismiss any action commenced after January 1, 2015 that was not set down for trial within 5 years of its commencement. Prior to January 1, 2015, the Registrar was required to serve a Notice of Status Hearing. The Plaintiff argues that since this action was commenced in 2014, it should have received a Notice of Status Hearing in support of its position that a more flexible test should apply on this motion.
[15] The transition provisions of Rule 48.14 which were in effect from January 1, 2015 to March 31, 2015 provided that the Rule as it read before January 1, 2015 continued to apply if a status hearing was scheduled but not heard before January 1, 2015 (Rule 48.14(12), now revoked). The Plaintiff did not receive a Notice of Status Hearing prior to January 1, 2015 nor was a status hearing scheduled. Accordingly, I am satisfied that the Plaintiff was not entitled to receive a Notice of Status Hearing and the applicable provisions are Rules 48.14(1) and (10) and Rules 37.14(1) and (2) as set out above.
[16] Turning to a consideration of the Reid factors, the Defendants do not dispute that the Plaintiff moved promptly to set aside the Dismissal Order. Therefore, this factor favours the Plaintiff. However, in my view, the first and second Reid factors present a greater challenge for the Plaintiff.
[17] With respect to the first Reid factor, in determining what constitutes an adequate explanation, the totality of the circumstances must be examined having regard to the competing interests at stake and the interests of justice (3 Dogs Real Estate Corp. v. XCG Consultants Ltd., 2014 ONSC 2251 at para. 37). The Plaintiff cites numerous business and family hardships after the commencement of this action as reasons it did not move the litigation forward.
[18] The Plaintiff relies on the Affidavit of Shirley Monteiro, a Director, sworn March 26, 2019 (the “Monteiro Affidavit”). Ms. Monteiro explains that the Plaintiff’s ambulances were involved in 3 accidents (1 in 2014 and 2 in 2017), all involving her daughter Sharlene Monteiro, also a Director, and all of which resulted in financial losses due to the loss of use of the ambulances. She also explains that Sharlene’s divorce proceedings consumed time, money and emotional energy and that as unsophisticated litigants they did not have the wherewithal to pursue this litigation. She also states that she and her husband sent $40,000 to her father in law in Florida to have open heart surgery in 2017 and that they were involved in a serious car accident in Florida in 2017. Ms. Monteiro also asserts that, as a family run operation, the Plaintiff’s business was impacted significantly by the accidents, the divorce and her father in law’s surgery, they were unable to secure contracts or clientele due to lack of staff, equipment and money and that funds they had set aside for this litigation were diminished due to these unforeseen circumstances. She further states that the Plaintiff always wanted to proceed and continue with this action.
[19] The difficulty with the Plaintiff’s explanation is that it made a deliberate decision not to advance this action. As the Court of Appeal has held, a deliberate choice not to advance the litigation will usually be fatal to a plaintiff’s motion. Even accepting the Plaintiff’s explanation at face value, there remains an unexplained period of delay of approximately 2 years and 8 months between the first ambulance accident in 2014 and the next one in May 2017 (and 2 years and 5 months between the first accident and her father in law’s surgery).
[20] The Plaintiff’s explanation is also similar to the one rejected by Master Sugunasiri in Unlimited Motors Inc. v. Automobili Lamborghini Spa, 2019 ONSC 1423. In that case, the principal of the corporate plaintiff relied on other litigation, his own health, family health issues and family responsibilities as reasons the corporate plaintiff did not advance the litigation. Master Sugunasiri held that the main reason for the delay was the choice to focus attention on other litigation and that there was no nexus between some of the personal reasons cited and the failure of the corporation to move the case forward. She also stated that the circumstances would have been different had the plaintiff communicated with the defendants during the period of inactivity. As in the present case, there was “radio silence and it is understandable that the Defendant believed the action to be dead on the vine” (Unlimited Motors at para. 10).
[21] For similar reasons, I reject the Plaintiff’s explanation here. Although the accidents involving the Plaintiff’s ambulances inevitably impacted the business, they do not fully explain why the Plaintiff could not have taken some steps in the litigation or at the very least communicated with Defendants’ counsel during the over 4 years of inactivity. This does not support the Plaintiff’s assertion that it always wanted to proceed with this action. Further, the personal circumstances related to Sharlene’s divorce and the father in law’s health issues, although difficult and unfortunate, are the circumstances of non-parties, not the corporate Plaintiff. Accordingly, I cannot conclude that these circumstances are sufficiently connected the Plaintiff’s alleged inability to take any steps. In balancing the rights of the parties, it would be unfair to the Defendants to permit the Plaintiff to effectively hold this action in abeyance for over 4 years as a result of the personal circumstances of its principals without taking any steps in the litigation or communicating with Defendants’ counsel. Accordingly, I am not satisfied that the Plaintiff has provided an adequate explanation for not setting the action down in a timely manner.
[22] With respect to the second Reid factor, I cannot conclude that the Plaintiff always intended to set this action down for trial within the required time period or that its failure to do so was inadvertent. In Sokoloff v. Bateriwala, 2019 ONSC 5442, Master Jolley concluded that the plaintiff did not inadvertently miss the set down date where it had not taken the usual steps of documentary and oral discovery and the action was nowhere near ready to be set down. Similarly, the Plaintiff here has taken no steps to move the action forward including documentary discovery. There is also no evidence that the Plaintiff or its counsel simply missed the deadline.
[23] Further, a plaintiff must lead evidence that it was always their intention to proceed with the action which includes what instructions were provided to counsel (Dunn v. Best Built Doors Inc., 2011 ONSC 3843 at para. 32). There is no evidence before me of any instructions provided by the Plaintiff to its counsel. There is also no documentary evidence to support the statement in the Monterio Affidavit that the Plaintiff had “already begun” to prepare its affidavit of documents when it received the Dismissal Order. Plaintiff’s counsel submits that this would have required the Plaintiff to waive solicitor-client privilege over certain documents. However, it is not uncommon for a plaintiff to do so or to file documents under seal to demonstrate that the Plaintiff was instructing its counsel to proceed.
[24] With respect to the fourth Reid factor, actual prejudice, the parties’ arguments are not particularly strong. The Plaintiff bears the onus of demonstrating that the Defendants will not suffer any significant prejudice in presenting their case at trial as a result of the Plaintiff’s delay (Abou-Naoum v. Leon’s Furniture Ltd., 2016 ONSC 7341 at para. 66). A plaintiff’s evidence should identify the important witnesses and indicate whether or not they remain available to give evidence or whether their evidence and important documentary evidence has been preserved (Dunn at para. 32; Martin v. John Doe, 2017 ONSC 6955 at para. 33). A moving party’s bald assertion that there is no evidence of prejudice to the defendant is inadequate (McNeill v. Sun Life Assurance, 2019 ONSC 4351 at para. 20; MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 at para. 26).
[25] The Plaintiff has not addressed prejudice at all in the Monteiro Affidavit and has provided no evidence regarding the availability of its witnesses and the preservation of documents and testimony. I also reject the Plaintiff’s argument that the Defendants could have brought a motion to dismiss this action for delay or taken other steps at any time. The Plaintiff bears the responsibility to move its action forward and there is no requirement for the Defendants to spend time and money on dormant litigation that appears to have been abandoned (Abou-Naoum at para. 50; Unlimited Motors at para. 25).
[26] At the same time, the Defendants’ submissions that they would suffer actual prejudice if the Dismissal Order is set aside are not terribly compelling. MSSI submits that due to a corporate merger and the passage of time, nobody with direct involvement in or knowledge of the matters at issue remains employed with MSSI to provide evidence or review documents. With respect to the McNab Defendants, counsel submits that as a result of Mr. McNab’s separation he has been unable to access documents including notes that would have formed a significant part of the evidence relied on by the McNab Defendants. MSSI concedes that it has not made any efforts to contact the former employees, and Mr. McNab states that his spouse may have destroyed the documents. The Defendants also rely on the general principle that memories have faded given the passage of time. I place little weight on the finality principle as urged by the Defendants given that there was only a short period of time between the issuance of the Dismissal Order and this motion during which they were able to rely on the dismissal of the action (Prescott v. Barbon, 2018 ONCA 504 at paras. 35-39).
[27] The nature and sufficiency of the evidence filed by a plaintiff on a set aside motion is an appropriate factor for the court to consider in determining whether or not to exercise its discretion (Dunn at para. 31). Given the complete absence of any evidence from the Plaintiff with respect to actual prejudice and without knowing whether the Plaintiff has preserved relevant documents and its witnesses are available or their testimony preserved, I conclude that the Plaintiff has not discharged its onus to demonstrate that the Defendants would not suffer any actual prejudice. As such, the fourth Reid factor also favours the Defendants, though not as convincingly as the first and second factors.
[28] Having weighed all of the relevant factors, applied the required contextual approach and balanced the Plaintiff’s right to have this action tried on its merits with the Defendants’ right to have it tried in a timely fashion, I conclude that the just result in the circumstances is that the Plaintiff’s motion be dismissed. In my view, the collective weight of the Plaintiff’s inadequate explanation for over 4 years of delay with no communication, the lack of inadvertence, and the absence of any evidence from the Plaintiff with respect to actual prejudice is too significant for the Plaintiff to overcome.
Security For Costs Motion
[29] Had I concluded that the Dismissal Order should be set aside, I would have ordered that it is just in the circumstances for the Plaintiff to post security for costs with respect to MSSI. The McNab Defendants do not seek security for costs.
[30] I recently summarized the law on security for costs in Canadian Metal Buildings Inc. v. 1467344 Ontario Limited, 2019 ONSC 566 and Kerlow v. Corrigan, 2019 ONSC 5181.
[31] Rule 56.01(1) states:
“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.
[32] Rule 56.01(1) does not create a prima facie right to security for costs but triggers an enquiry whereby the court, using its broad discretion, considers multiple factors to make such order as is just in the circumstances. These factors include the merits of the claim, the financial circumstances of the plaintiff and the possibility of an order for security for costs preventing a bona fide claim from proceeding (Stojanovic v. Bulut, 2011 ONSC 874 at paras. 4-5).
[33] The Court of Appeal provided the following guidance and clarity in Yaiguaje v. Chevron Corp., 2017 ONCA 827:
“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), 1989 4354 (ON SC), 70 O.R. (2d) 119 (H.C.); Morton v. Canada (Attorney General) (2005), 2005 6052 (ON SC), 75 O.R. (3d) 63 (S.C.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 2009 46451 (ON SC), 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 the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.”
[34] The Court of Appeal subsequently provided additional guidance in Novak v. St. Demetrius (Ukrainian Catholic) Development Corporation, 2018 ONCA 219:
“7 Justice Epstein's order was made prior to the release of this court's decision in Chevron Corp. v. Yaiguaje, 138 O.R. (3d) 1, 2017 ONCA 827, which was included in the appellant's materials. We do not read that decision as altering the established test for ordering security for costs. The established test requires a judge, after analysing the specific factors spelled out in the rules, to consider the overall justness of the order sought. In Yaiguaje v. Chevron Corp. the court found that the motion judge had erred in principle in her consideration of the justness of the order.
8 In this case, we are satisfied the Epstein J.A. did not err in considering the ordering of security for costs to be just. Unlike in Yaiguaje v. Chevron Corp, the appellant in this case has a direct economic interest in the appeal. The respondent is not a global enterprise but a not-for-profit senior citizens care centre operated by a church. Unrecoverable costs will reduce the respondent's resources it can dedicate to the care of its clients. There is no indication the respondent sought security for costs as a litigation tactic to end the appeal. The appeal raises no overarching, important, or novel issue. There is no apparent overriding public interest in allowing the appeal to proceed without the posting of ordered security for costs.”
[35] The initial onus is on the defendant to show that the plaintiff falls within one of the four enumerated categories in Rule 56.01. The defendant’s onus under Rule 56.01(d) is a light one to show that there is good reason to believe that the plaintiff has insufficient assets in Ontario to satisfy a costs award (Georgian Windpower Corp. v. Stelco Inc., [2012] O.J. No. 158 (ONSC) at para. 7).
[36] If the defendant meets the initial onus, the plaintiff can rebut the onus and avoid security for costs by showing that they have sufficient assets in Ontario or a reciprocating jurisdiction to satisfy a costs order; the order is unjust or unnecessary; or the plaintiff should be permitted to proceed to trial despite its impecuniosity should it fail (see Travel Guild Inc. v. Smith, 2014 CarswellOnt 19157 (S.C.J.) at para.16; Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (ONSC) at para. 7; Cobalt Engineering v. Genivar Inc., 2011 ONSC 4929 at para. 16).
[37] Master Glustein (as he then was) summarized the applicable principles at paragraph 7 of Coastline:
“7 I apply the following legal principles:
(i) The initial onus is on the defendant to satisfy the court that it "appears" there is good reason to believe that the matter comes within one of the circumstances enumerated in Rule 56.01 (Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119 (H.C.J.) at 123);
(ii) Once the first part of the test is satisfied, "the onus is on the plaintiff to establish that an order for security would be unjust" (Uribe v. Sanchez (2006), 33 C.P.C. (6th) 94 (Ont. S.C.J. - Mast) ("Uribe") at para. 4);
(iii) The second stage of the test "is clearly permissive and requires the exercise of discretion which can take into account a multitude of factors". The court exercises a broad discretion in making an order that is just (Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175 (S.C.J.) at para. 12; Uribe, at para. 4);
(iv) The plaintiff can rebut the onus by either demonstrating that:
(a) the plaintiff has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation,
(b) the plaintiff is impecunious and that justice demands that the plaintiff be permitted to continue with the action, i.e. an impecunious plaintiff will generally avoid paying security for costs if the plaintiff can establish that the claim is not "plainly devoid of merit", or
(c) if the plaintiff cannot establish that it is impecunious, but the plaintiff does not have sufficient assets to meet a costs order, the plaintiff must meet a high threshold to satisfy the court of its chances of success (See Willets v. Colalillo, [2007] O.J. No. 4623 (S.C.J. - Mast.) at paras. 46, 47, and 55; Uribe, at para. 5; Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at para. 50; Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP, [2007] O.J. No. 4096 (S.C.J. - Mast.) ("Bruno") at para. 35);
(v) Merits have a role in any application under Rule 56.01, but in a continuum with Rule 56.01(1)(a) at the low end (Padnos v. Luminart Inc., 1996 11781 (ON SC), [1996] O.J. No. 4549 (Gen. Div.) ("Padnos"), at para. 4; Bruno, at para. 36);
(vi) The court on a security for costs motion is not required to embark on an analysis such as in a motion for summary judgment. The analysis is primarily on the pleadings with recourse to evidence filed on the motion, and in appropriate cases, to selective references to excerpts of the examination for discovery where it is available (Padnos, at para. 7; Bruno, at para. 37);
(vii) "If the case is complex or turns on credibility, it is generally not appropriate to make an assessment of the merits at the interlocutory stage. The assessment of the merits should be decisive only where (a) the merits may be properly assessed on an interlocutory application; and (b) success or failure appears obvious" (Wall v. Horn Abbott Ltd., 1999 7240 (NS CA), [1999] N.S.J. No. 124 (C.A.) at para. 83);
(xiii) When an action is in its early stages, an installment (also known as "pay-as-you-go") order for security for costs is usually the most appropriate (Bruno, at para. 65; Hawaiian Airlines, Inc. v. Chartermasters Inc., et al. (1985), 1985 2155 (ON SC), 50 O.R. (2d) 575 (S.C.O. - Mast.).”
[38] The plaintiff’s financial disclosure requires “robust particularity” 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 of the plaintiffs to borrow funds; and details of any assets disposed of or encumbered since the cause of action arose (General Products Inc. v. Actiwin Company Limited, 2015 ONSC 6923; Al Masri v. Baberakubona, 2010 ONSC 562 at para. 19). A plaintiff must demonstrate that its assets are readily exigible and marketable as a successful party should be able to recover its costs without resort to extraordinary measures (Chemical Vapour Metal Refinishing v. Terekhov, 2016 ONSC 7080 at para. 25).
[39] In General Products, Lemon J. identified the relevant factors when considering the sufficiency of evidence put forward by a plaintiff attempting to demonstrate that it has sufficient assets in Ontario to satisfy a costs award:
i.) the court must critically consider the quality as well as the sufficiency of the assets presently held and whether they are bona fide assets of the company;
ii.) there must be demonstrated exigible assets. It is insufficient for the plaintiff to show that it is profitable since the focus of the rule is not on income, but rather on the nature and sufficiency of assets;
iii.) the court must consider the liabilities of the company as well as its assets and in particular whether the assets to which the defendant is expected to look are secured to another creditor;
iv.) the rule does not countenance extensive and speculative inquiries as to the further value and availability of the asset. A mere possibility that the assets may be removed at some future time is not, without more, grounds for security;
v.) the failure of a plaintiff to respond to a defendant’s enquiry as to the availability of assets may raise a doubt as to the existence of assets.” (General Products at para. 19)
[40] MSSI seeks security for costs in the amount of $45,000 on partial indemnity scale for the entirety of this action and, if costs are awarded in tranches, $25,000 up to and including examinations for discovery.
[41] In my view, MSSI has met the light onus of demonstrating that the Plaintiff has insufficient assets in Ontario to pay MSSI’s costs if unsuccessful. I further conclude that the Plaintiff has not rebutted this onus.
[42] In addition to the Plaintiff’s admitted financial difficulties which it submits prevented it from moving this action forward for over 4 years, the Plaintiff’s financial disclosure on this motion reflects substantial cash flow issues including a net income of approximately $6,000 for the year ended May 31, 2019. The Plaintiff also concedes that it has incurred deficits over the last two years.
[43] The Plaintiff contends that it is financially sound and has sufficient assets to satisfy a costs award. The Plaintiff relies largely on the fact that it has secured 3 service contracts which it submits constitute assets in the patient transfer industry. The Plaintiff states that these can be sold, subcontracted, assigned or used as collateral to borrow funds. The Plaintiff also states that it owns 2 ambulances valued at $12,000 each and has provided evidence that it recently received approximately $70,000 in cash from an undisclosed source leaving it with a closing bank balance of approximately $81,000.
[44] There are numerous deficiencies with the Plaintiff’s evidence and financial disclosure. There is no evidence as to the value of the service contracts, which, in any event, do not constitute assets but rather potential, contingent income and profits. With respect to its bank account, the bank statements are heavily redacted, over $70,000 was deposited in the 10 days before the swearing of the Monteiro Affidavit and most importantly, the Plaintiff has filed no evidence as to its liabilities in order for me to assess how much of these funds are required to pay for business expenses particularly in light of the recent cash flow difficulties. Further, the Plaintiff has provided no valuations for the ambulances or evidence that they are unencumbered. The Plaintiff also does not own any real property and has provided no evidence of its ability to borrow. Based on the record before me, I find that the Plaintiff has not provided evidence of the sufficiency of its assets with the requisite robust particularity for me to conclude that it has rebutted its onus.
[45] In addition, although the Plaintiff submits that MSSI’s request for $25,000 in security up to and including examinations for discovery is too much, it does not assert that having to post security for costs would prevent it from proceeding with this action. Accordingly, having weighed all of the relevant factors and taking a holistic approach, I am satisfied that it would be just in all of the circumstances for the Plaintiff to post security for costs. In arriving at this conclusion, I am of the view that the merits of the Plaintiff’s claims are not a prominent factor on this motion.
[46] Turning to the quantum of security, the court has broad discretion to determine a fair and reasonable amount which is substantially similar to the exercise of its discretion in fixing costs pursuant to Rule 57.01. The amount should reflect a number that falls within the reasonable contemplation of the parties reflecting what the successful defendant would likely recover and the factors set out in Rule 57.01 (720441 Ontario Inc. v. The Boiler et al, 2015 ONSC 4841 at para. 56; Marketsure Intermediaries Inc. v. Allianz Insurance Co. of Canada, 2003 CarswellOnt 1906 at paras. 17-20). In most cases, security for costs will be ordered on a partial indemnity scale (The Boiler at para. 58; Marketsure at paras. 17-18). It is appropriate in certain circumstances to order that security for costs be paid in tranches by stage(s) in the litigation on a “pay as you go” basis (Marketsure at paras. 13-15).
[47] Having considered all of the relevant factors and circumstances, I conclude that it would be appropriate to award security for costs on an instalment basis up to and including the completion of examinations for discovery, including any motions arising from undertakings and refusals. Reviewing the Costs Outline, I am satisfied that it would be fair, reasonable and just in all of the circumstances to order the Plaintiff to pay security for costs with respect to MSSI in the amount of $20,000 on a partial indemnity scale up to and including examinations for discovery and any motions arising within 60 days.
IV. Disposition
[48] Order to go dismissing the Plaintiff’s motion.
[49] If the parties cannot agree on the costs of these motions, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines) with the Hamilton Assistant Trial Co-Ordinator on a timetable to be agreed upon between counsel.
Released: December 19, 2019
Master M.P. McGraw