Court File and Parties
COURT FILE NO.: CV-18-608110
DATE: 2020/01/06
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MASTER TECH INC., Plaintiff
AND:
ASSAF et al., Defendant
BEFORE: MASTER RONNA M. BROTT
COUNSEL: Fariborz M. Tavana, self-represented plaintiff Email – farrytavana@gmail.com
Marc Kestenberg, for the Defendants Fax: 416-597-6567
ENDORSEMENT
[1] The defendants bring this motion to:
(1) stay the within action until such time as the plaintiff pays an outstanding costs order; and
(2) for an Order that the plaintiff pay $25,000.00 as security for the defendants’ costs in this action through to the completion of the examinations for discovery.
[2] This is a solicitors’ negligence action. The defendant Wajeb Assaf (“Assaf”) was retained by the plaintiff Master Tech Inc. to defend a claim and assert a counterclaim in a proceeding commenced by SMTCL Canada Inc. (“SMTCL”). At the time, Assaf practiced at Klaiman Edmonds LLP, the other named defendant in the within action.
[3] On November 6, 2016 Justice Myers granted SMTCL summary judgment. Master Tech’s principal, Fariborz M. Tavana (“Tavana”) obtained leave to personally represent Master Tech on an appeal of Justice Myers’ summary judgment order.
[4] SMTCL brought a motion for security for costs in relation to Master Tech’s appeal. On January 25, 2017 Justice Laskin ordered Master Tech to post $7500.00 as security for SMTCL’s costs on the appeal.
[5] On the appeal, Master Tech and Tavana made allegations of professional conduct and negligence against Assaf so the latter brought a motion under Rule 13 to intervene on the appeal. On April 10, 2017, Assaf was granted the right to intervene. On September 25, 2017 the Court of Appeal dismissed the appeal and ordered Master Tech to pay, inter alia, Assaf’s costs on the appeal fixed at $6000.00 plus interest at 2%.
[6] After the hearing of this motion, I was advised that Master Tech and Tavana had paid the sum of $6000.00 with respect to the costs order made by the Court of Appeal in favour of the defendant Assaf. The correspondence notes that parties have been unable to agree on the 2% interest amount for the two-year period. Assaf’s counsel take the position that the sum of $240.00 remains outstanding. Tavana asserts the $6000.00 was all-inclusive. For the purposes of this motion, I am not prepared to stay the within action for a sum of $0 – $240.00. This Endorsement is therefore in relation to the defendants’ motion for security for costs only.
[7] Rule 56.01(1) requires Master Tech to post security for costs where it appears that the plaintiff is:
(a) ordinarily resident outside Ontario; or
(d) 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;
[8] Relying on both Master Glustein’s decision in Coastline Corp. v Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (Ont. S.C.J.) at para. 7, and Master Muir’s decision in 2179548 Ontario Inc. v 2467925 Ontario Inc. [2017] O.J. No. 246 (Ont. S.C.J.) at para 8, Justice Henderson in 2311888 Ontario Inc. v Ross 2017 CarswellOnt 2661, 2017 ONSC 1295, 277 A.C.W.S. (3d), 69 C.L.R. (4th) 40 at para. 17 states:
In summary, the proper way to analyze a motion for security for costs is as follows:
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. See Hallum v Canadian Memorial Chiropractic College (1989), 70 OP.R. (2d) 119 (Ont H.C.) at p. 123.
ii. Once the first part of the test is satisfied, the onus is on the plaintiff to establish that an order for security for costs would be unjust. See Chachula at para. 10, and Uribe v Sanchez (2006), 33 C.P.C. (6th) 94 (Ont. S.C.J.) at para. 4;
iii. The plaintiff can meet the onus by 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 the plaintiff’s claim is not plainly devoid of merit (See Pitkeathly v 1059288 Ontario Inc., [2004] O.J. No. 4125 (Ont. S.C.J.)at para. 10); 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 satisfy the court that the plaintiff’s claim has a good chance of success on the merits. See Bruno Appliance and Furniture Inc. v Cassels Brock & Blackwell LLP, [2012] O.J. No. 3620 (Ont. S.C.J.) at paras. 41-46.
[9] Tavana is the president, sole director and sole shareholder of Master Tech and he is ordinarily resident outside Ontario. Tavana’s affidavit filed in support of the motion for leave to represent Master Tech in the SMTCL action states that Master Tech’s operations have “been reduced to a minimum” as a result of the Canadian Border Services Agency. Assaf believes that Tavana ceased operating Master Tech in Ontario, moved to Alberta and began operating Master Tech from his personal apartment in Calgary. Master Tech’s address is a Calgary Alberta address. This evidence is sufficient to satisfy the defendants’ onus under 56.01(1)(a).
[10] With respect to 56.01(1)(d), based on the evidence, I find that the defendants have proved that the plaintiff corporation has insufficient assets in Ontario to pay the costs of the defendants. I rely on the following evidence:
Master Tech’s own evidence that its operations have been reduced to a minimum;
Master Tech’s own evidence that it has been relying on cash advances from its sole shareholder, Mr. Tavana;
Master Tech’s own evidence that it does not have the financial means to retain counsel;
Justice Laskin’s finding on SMTCL’s motion for security for costs that “the record before me shows that Master Tech has insufficient assets in Ontario to pay the costs of the appeal”;
Mr. Assaf’s belief that his client, Master Tech, had moved to Calgary;
Mr. Assaf’s belief that his client, Master Tech, carried on operations from Tavana’s apartment.
The lack of evidence regarding the ownership of the machines.
[11] Rule 56.01 is discretionary and permits the court to make an order “as is just”. In exercising its discretion, the court is to consider a number of factors including but not limited to the plaintiff’s impecuniosity, the merits of the action and fairness.
[12] As the defendants have demonstrated that the matter comes within two of the categories of Rule 56.01(1), the onus shifts to Master Tech to establish that an order for security for costs would be unjust. Master Tech must demonstrate that it does have sufficient assets to satisfy any order or it is impecunious and its claim is not devoid of merit or, if not impecunious but has insufficient assets to meet a costs order, it must satisfy the court that its claim has a good chance of success on the merits.
[13] Master Glustein, as he then was, addressed the issue of impecuniosity in Coastline Corp. v Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 where he stated:
(viii) The evidentiary threshold for impecuniosity is high, and “bald statements unsupported by detail” are not sufficient. The threshold can only be reached by “tendering complete and accurate disclosure of the plaintiff’s income, assets, expenses, liabilities and borrowing ability, with full supporting documentation for each category where available or an explanation where not available”
(ix) To meet the onus to establish impecuniosity, “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”
(x) A corporate plaintiff who claims impecuniosity must demonstrate that it cannot raise security for costs from it shareholders and associates, i.e. it must demonstrate that its principals do not have sufficient assets. Evidence as to the “personal means” of the principals of the corporation is required to meet this onus. A corporate plaintiff must provide “substantial evidence about the ability of its shareholders or others with an interest in the litigation to post security”. “A bare assertion that no funds are available” will not suffice.
(xi) Consequently, full financial disclosure requires the plaintiff to establish the amount and source of all income, a description of all asserts 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
(xii) Because the plaintiff has the onus to establish impecuniosity, a defendant “can choose not to cross-examine if the plaintiff fails to lead sufficient evidence”. The decision not to cross-examine does not convert insufficient evidence into sufficient evidence”
[14] Master Tech has not pled impecuniosity. The only evidence he filed are two financial returns. There are no tax returns in evidence. Accordingly, I find that the plaintiff has not proved impecuniosity.
[15] Master Tech’s position on this motion has been to argue the merits of the action. In his Affidavit, Mr. Tavana suggests that Assaf was negligent for:
Failing to produce documents in response to an undertaking he gave on behalf of Mr. Tavana at his cross-examination on the summary judgment motion; and
Not advising Justice Myers that Master Tech had applied for a permit to export the machinery.
[16] The defendants submit that there were and are no documents that are responsive to the undertaking and Master Tech’s issue of the application for a permit was not argued on the summary judgment motion because it did not support its position on the summary judgment motion. The defendants assert that the outcome on the summary judgment motion would not have been different even if documents had been produced, or if Assaf had told Justice Myers about the permit.
[17] I find that while the plaintiff’s case is somewhat complex and may turn on credibility. While it is not clearly devoid of merit, its chances of success do not meet the higher threshold required where a plaintiff fails to prove impecuniosity but still does not have sufficient assets for the defendants’ costs. The plaintiff has not provided ample evidence to demonstrate a good chance of success in this action. For these reasons I have concluded that it is just in the circumstances of this action for an order to be made requiring the plaintiff to post security for the costs of the defendants.
[18] The defendants estimate their costs from commencement of the proceeding up to and including the completion of examinations for discovery, to be in excess of $25,000.00. On a partial indemnity basis it is ordered that the plaintiff pay into court as security for costs the sum of $15,000.00 within 90 days. This amount represents security for costs until the completion of all examinations for discovery without prejudice to the defendants bringing a further motion for further security.
[19] The parties shall attempt to agree on the issue of costs of this motion within 30 days and if unable to do so, the defendants shall deliver brief written submissions (1 -2 pages) within 14 days. Thereafter, the plaintiff shall respond briefly (1 – 2 pages) to the costs submissions only, within 14 days after receipt of the defendants’ submissions.
MASTER RONNA M. BROTT
Date: January 6, 2020