COURT FILE NO.: CV-20-637294
DATE: 2021/06/01
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PROVIDENCE GRACE INC., Plaintiff
AND:
YARDISTRY LTD., Defendant
BEFORE: MASTER R.M. BROTT
COUNSEL: Myron Shulgan, Counsel, for the Plaintiff/Responding Party
Email – mshulgan@strosbergco.com
Stewart Thom, Counsel, for the Defendant/Moving Party
Email – sthom@torkinmanes.com
HEARD: April 22, 2021
ENDORSEMENT
[1] The defendant Yardistry Ltd. (“Yardistry”) manufactured ready-to-assemble outdoor recreational furniture for retail outlets. Frontier Northern (“Frontier”), a US corporation, had served as Yardisty’s sales representative for sales to Costco. Mary Jackson, (“Mary”) was an officer and director at Frontier Northern. In December 2017 Frontier assigned to Mary and the plaintiff, Providence Grace Inc. (“Providence”) its account with Yardistry.
[2] Yardistry had paid to Frontier 1.2% of the price of goods sold to Costco. In this action the plaintiff alleges that when the assignment took place, Yardistry unilaterally reduced its commission from 1.2% to .4%. The plaintiff claims damages of $2.5 million from the defendant for breach of contract.
[3] The defendant now brings this motion seeking leave to compel the plaintiff to post $135,000 as security for costs. On these motions, the courts have established a two-step process. The initial onus is on the moving party to satisfy the court that it appears there is good reason to believe that the matter comes within one of the enumerated areas in Rule 56.01(1). Yardistry moves pursuant to Rule 56.01(1)(a) and/or 56.01(1)(d).
[4] Rule 56.01(1) 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,
(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(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;
[5] Under 56.01 (1)(a) it is not necessary to find conclusively that the plaintiff is not resident in Ontario, but rather, it is only necessary to be persuaded that the plaintiff “appears” to be ordinarily resident outside Ontario. (Austin v Torstar Corp., [2001] O.J. No 3378 at para 23).
[6] Providence conducts business in Ontario under an extra-provincial licence. It leases an office in Windsor, Ontario. Providence also maintains a bank account in Windsor where at the end of August 2020 it had a balance of approximately $5000. Due to COVID, Mary has not been in Ontario since 2019.
[7] Courts have held that simply because a corporation may have an extra-provincial licence or an Ontario mailing address does not deem it to be ‘ordinarily resident’ in Ontario (Buckeye Incubator Co. v Rice Construction Ltd. 1963 CanLII 202 (ON SC), [1963] 2 O.R.195 (H.C.).
[8] Under 56.01 (1)(d) the defendant need only demonstrate that it appears that the plaintiff is a corporation and there is “good reason to believe” that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant.
[9] While is it arguable whether or not the defendant has met the onus under 56.01 (1)(a) in light of Providence’s evidence, it does seem clear that the defendant has met the light onus under Rule 56.01(1)(d).
[10] Once the first step is satisfied, the onus shifts to the responding party to establish that an order for security for costs would be unjust. Providence can meet that onus by demonstrating one of the following:
It has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation;
It is impecunious and that its claim “is not plainly devoid of merit”; or
If Providence cannot establish that it is impecunious, but it does not have sufficient assets to meet a costs order, that its claim has a “good chance of success” on the merits. (2311888 Ontario Inc. v Ross, 2017 ONSC 1295, Coastline Corp. v Canaccord Capital Corp. 2009 CanLII 21758 (ON SC), [2009] O.J. 1790).
[11] The plaintiff does not allege impecuniosity. The plaintiff’s evidence is that it does not presently have funds available to it to post security for costs. It alleges that its inability to do so results as a direct consequence of the defendant’s alleged wrongful refusal to pay to Providence the commissions to which the plaintiff claims entitlement. Further, there is uncontradicted evidence that the defendant is presently indebted to the plaintiff in the amount of $13,000 for outstanding commissions.
[12] Providence has failed to provide much evidence of its assets in Ontario. Caselaw is clear that the plaintiff faces a high onus to demonstrate with “robust particularity” the state of its finances. As stated by Master Dash in Marion Custom Metals Inc. v Arlat Metals Inc. [2003] O.T.C. 1046 (Sup. Ct.) at para 24:
It is incumbent on the corporation to provide information and supporting documentation as to the current status of its assets and liabilities secured against those assets put forward as available to pay a judgment for costs.
[13] An order for security for costs is highly discretionary. The Court may make such order “as is just”. There is caselaw in support of the defendant’s position which notes that even where a plaintiff resides in a foreign jurisdiction with reciprocating enforcement of judgments legislation, the existence of the legislation is only a factor to be considered in the exercise of judicial discretion (Smallwood v Sparling (1983) 1983 CanLII 1930 (ON SC), 34 C.P.C. 24 (Ont. S.C.).
[14] Significantly Mary has undertaken to make funds in excess of $100,000.00 standing to her personal credit in an investment account that she maintains, available to Yardistry to satisfy any costs awards granted to the defendant, should the plaintiff’s action be unsuccessful. The defendant submits that even though the US is a reciprocating jurisdiction, the plaintiff must establish that the assets can be conveniently realized upon and it has failed to do so. The plaintiff on the other hand asserts that she can freely access her IRA. There is no conclusive evidence from either party about the exigibility of the account.
[15] On the merits of the claim Yardistry relies on privity of contract and asserts that neither Mary nor Providence as assignee, has privity of contract with the defendant. However, the defendant has acknowledged that it owes to the plaintiff the sum of $13000 and further acknowledges the past relationship between Yardistry and Mary’s predecessor, Frontier. Although there is no written agreement between Mary and Yardistry, the standard of practice speaks for itself and it will be up to the trial judge to make a final determination as to whether the defendant had to provide formal notice to the plaintiff of its intentions to alter the agreement.
[16] Security for costs motions are intended to protect defendants from unmeritorious claims. The motion is not meant to unjustly deny a foreign plaintiff from pursuing its legitimate claims in Ontario.
[17] In balancing the defendant’s interest in being protected from the risk of not being able to collect an order for costs if one is made and the plaintiff’s interest in pursuing the action, I accept and rely on the plaintiffs’ undertaking that she will make her personal account available to the defendant if necessary. The plaintiff should not be prevented from advancing this action. There is no evidence that the defendant will in any way be prevented from defending this action. I accordingly find that to make an order for security for costs at this time would be unjust. This motion is therefore dismissed.
[18] Providence consents to the defendant being at liberty to renew this motion for security for costs in the future, following examinations for discovery, if and when further evidence and productions become available.
[19] The parties agreed that they shall use best efforts to agree on the issue of costs within thirty days (30) and if unable to, they shall deliver to the court, their Costs Outlines together with brief (1-2 page) written costs submissions within sixty (60) days.
MASTER RONNA M. BROTT
Date: June 1, 2021