Court File and Parties

OSHAWA COURT FILE NO.: 94108/15SR-A DATE: 2021-05-18 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Apex Sound & Light Corporation, Plaintiff AND: 1878170 Ontario Ltd. O/A Ashen White Audio Visual Executives, Defendant/Third Party Plaintiff AND: Metalworks Productions Inc., Third Party Defendant

BEFORE: The Honourable Mr. Justice C.F. de Sa

COUNSEL: Arnold B. Schwisberg and Adam R. Giel, Counsel for the Moving Party/ Third Party Defendant Michael Simaan, Counsel for the Defendant/Third Party Plaintiff Kyle C. Armagon, Counsel for the Plaintiff

HEARD: May 13, 2021

Endorsement

[1] Metalworks Productions Inc. (“Metalworks”) seeks an order compelling Ashen White Audio Visual Executives (“Ashen White”), the Third Party Plaintiff, to post security for costs incurred to date and prospective costs expected to be incurred for the trial of this action. They also ask that Ashen White’s third-party claim be stayed pending the payment of the security.

[2] According to Metalworks, Ashen White no longer has any assets to pay costs should it be unsuccessful in its third-party claim against Metalworks.

[3] On February 10, 2021, Danbury Global Auctioneers announced that Ashen White would be liquidating its inventory; that the pandemic had “devastated Ashen White’s business” and that it is “auctioning off all of [its] equipment and inventory”.

[4] The Announcement further stated that Ashen White had become a “casualty of covid” and was “closing its doors”.

[5] Should this matter proceed through trial, Metalworks estimates its total costs for the entire proceeding will be $79,937.19 (partial indemnity) and $117,184.14 (substantial indemnity), inclusive of legal fees, taxes, and disbursements.

[6] According to Metalworks, Ashen White is unlikely to succeed at trial. In the circumstances, Metalworks takes the position that it should not be required to go through a trial without Ashen White first posting security.

[7] The responding party, Ashen White, opposes the motion.

[8] The Plaintiff in the main action, Apex Sound & Light Corporation (“Apex”), is also opposed to the trial being adjourned.

[9] The trial of this action has been delayed for several years. If an order for security for costs is made, it will lead to another adjournment of the trial.

[10] Ashen White maintains that there is clear merit to the Third-Party Claim. As such, it would be highly prejudicial to the plaintiff to not have the action proceed to trial as scheduled. It would be even more prejudicial to the defendant to have the trial of the main action proceed, but not have the third-party action proceed at the same time.

Analysis

[11] The overriding purpose of security for costs is to protect Ontario litigants who have a genuine concern that a plaintiff will not be able to satisfy a costs award. See: Wachsmann v. Zahler, [2002] O.J. No. 4193 (S.C.J.), at para 17; 671122 Ontario Ltd. v. Canadian Tire Corp., 1993 8606 (ON CA), [1993] O.J. No. 2173 (C.A.).

[12] The first stage of the test under Rule 56.01 requires the defendant to satisfy the court that it “appears” that the matter comes within one of the circumstances enumerated in Rule 56.01. In this case, the defendant relies on 56.01(d). Rule 56.01(d) states:

56.01 (1) 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.

[13] Once one of the factors under Rule 56.01 is established, the onus is on the plaintiff to establish that an order for security would be unjust. See: Shuter v. Toronto Dominion Bank, 2007 37475 (ON SC), [2007] O.J. No. 3435 (S.C.J.), at paras. 60 & 63; Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (S.C.J.), at para 7.

[14] The second stage of the test is clearly permissive and allows the court to exercise discretion in balancing the interests of the parties. Coastline Corp. v Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (S.C.J.), at para 7.

[15] In Yaiguaje v. Chevron Corporation, 2017 ONCA 827, the Court of Appeal stated 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 requirements of the rule of been met.” The Court explained, at paras. 24-25:

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. [Citations omitted].

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. [Emphasis added]

[16] Delay on the part of the moving party is an appropriate consideration for the court when exercising its discretion. The failure of the moving party to explain its delay can be fatal to the motion, whether or not the responding party cannot establish prejudice arising out of the delay. 1645524 Ontario Ltd. v. Investpro Realty and Appraisal Ltd., 2013 ONSC 790: JV Mechanical Ltd. v. Solarc Construction Ltd., 2012 ONSC 1637, at paras. 14-15: Susin v. Genstar Development Co., [2001] OJ No 3825 [Susin], at para 7.

[17] In Kawkaban Corporation. v. Second Cup Ltd., 2005 35683 (ON SCDC), Justice O’Driscoll at para. 53, quotes Master Barlow in Charron v. MacDonald, 1938 352 (ON SC), [1938] O.W.N. 410 (Ont. H.C.), as follows:

Where a defendant believes that he is entitled to an order for security for costs, he should move at the earliest possible moment in order that the plaintiff may know whether or not he will be required to give security and to prevent him from proceeding at very considerable expense down to trial and then find himself faced with an order for security with which he is unable to comply.

By reason of the delay of the defendant MacDonald in making his application for security, the plaintiff has gone to the expense of bringing the action down to the eve of trial when she is faced with this application for security for costs. She should not be prevented at this late date from going to trial even if the material should be sufficient to warrant an order for security.

[18] The evidence filed by Metalworks indicates they were aware that Ashen White was having financial troubles as early as November 2020 and these concerns were confirmed by February 10, 2021. Yet, it was not until April 22, 2021 that Metalworks filed their motion materials. By this time, the Court had confirmed that the trial would be proceeding in the sittings commencing May 17, 2021.

[19] The trial of this action has been delayed for several years and the costs have been substantial. An initial trial date had to be adjourned at the request of Metalworks. If an order for security for costs is made, it will lead to another adjournment of the trial of this simplified procedure action. This adjournment would prejudice not only Ashen White, but it would also prejudice the interests of Apex who want the trial to proceed.

[20] The parties have all prepared for trial and are ready to proceed. Another adjournment will clearly cause additional costs to all involved.

[21] Bifurcation of the trial is not a reasonable option. It would clearly cause prejudice to all parties and would not be in the interests of justice.

[22] On a review of the pleadings, I cannot say that Ashen White’s claim has no chance of success. Apex leased concert lighting to Ashen White. Apex maintains that the lighting was “indoor” lighting. Ashen White sub-leased the equipment to Metalworks and signed a rental agreement (“Metalworks Agreement”). The Metalworks Agreement included a clause regarding damage to the equipment that stated:

The Rentee assumes the entire risk of loss or damage to the Equipment from any cause whatsoever. No loss or damage to the Equipment or any part thereof, however caused, shall effect or impair the obligations of the Rentee hereunder which shall continue in full force and effect. . . The Rentee agrees to maintain and carry, at its sole cost, adequate liability, physical damage, public liability, property damage and casualty insurance for the full replacement cost of the Equipment, including all risks of loss or damage covered by standard extended coverage endorsement, to cover any damage or liability arising from the handing, transportation, maintenance, operation, possession or use of the Equipment during the entire Term.

[23] In May 2015, the equipment was used by Metalworks outdoors at a festival during a rainstorm and resulted in damage to most of the equipment.

[24] I recognize that Metalworks contests that they were the cause of the damage and maintains that Ashen White caused the damage by demanding the equipment back before it could be dried off properly. However, I cannot say that Ashen White does not have a reasonable chance of succeeding in its claim against Metalworks.

[25] The action itself involves total damages in the amount of $60,000 and is hardly complex. The summary trial has 5 witnesses and is scheduled for 3 days. The overwhelming majority of the costs have already been incurred by the parties. Apex and Ashen White only have 1 witness each and affidavits for these witnesses have already been filed. Metalworks expects its total costs for the trial to be approximately $20,000.

[26] In my view, the actions of Metalworks appear directed at delaying a trial on the merits. Having regard to all the circumstances, ordering security for costs at this stage would be unjust.

[27] Accordingly, the motion is dismissed.

Justice C.F. de Sa

Date: May 18, 2021