Court File and Parties

Court File No.: CV-18-7880 Date: 2021-11-10 Superior Court of Justice - Ontario

Re: D. Bodkin, Plaintiff And: John Doe et al, Defendants

Before: Kurz J.

Counsel: Self Represented Plaintiff R. Lampropoulos, for the Defendants

Heard: November 9, 2021

Endorsement

(THE PLEADINGS AND ALL DOCUMENTS IN THIS ACTION ARE SEALED AND ALL COURT PROCEEDING ARE HELD IN CAMERA PURSUANT TO THE ORDER OF MILLER J., DATED SEPTEMBER 19, 2018)

[1] This is a motion for security for costs, brought by the defendants. They say that the Plaintiff is in breach of two costs orders, is in default of my previous order to produce an affidavit of documents, has failed to prove that he has either assets in Ontario or that he is impecunious with a meritorious claim, and that this action is frivolous and vexatious.

[2] The Plaintiff states that he did not intend to breach the costs awards. He felt that his unsuccessful attempt to appeal the Coats J. order cited below (which was dismissed for delay) would stay the order. He adds that he had intended to proceed with the appeal until the COVID court suspension, a lack of cooperation by the defendants and then personal circumstances affected him. He states that he has “no trouble” paying the costs awards and that his action has merits, as indicated by my previous decision, converting his application to this action.

[3] For the reasons that follow and based on his failure to pay the two costs awards, I order security for costs, but in an amount far more modest than the amount requested by the Plaintiff, which covers the period until after examinations for discovery.

Background to this Action

[4] The background to this action is set out in my decision of March 11, 2021, cited at 2021 ONSC 1852, where I offered the following narrative:

[5] The Applicant (“Bodkin”) is a long-practicing real estate lawyer. He was called to the bar in 1991. His practice is limited to real estate solicitor‘s work. The identities of the Respondents, John Doe 1 (“JD1”) and John Doe 2 (“JD2”) are anonymized by an order of Miller J., dated September 19, 2018. They are currently in the witness protection programme.

[6] Bodkin claims that in or about May 2006, JD1 approached him about buying two condominium units. They reached an agreement regarding one of those units (“the unit” or “the property”). Bodkin says that the agreement was to buy the unit. He would take possession of it and either reside in it or rent it out. He would pay all of the mortgage payments to JD1 and pay for all other maintenance and upkeep expenses for the unit as they come due.

[7] Bodkin says that he understood that JD1 was negotiating the sale on behalf of himself and his spouse. It turns out that the co-owner was JD1’s brother, JD2.

[8] Bodkin’s narrative continues, stating that JD1 told him that he was leaving for Egypt. JD1 assured Bodkin that they would finalize and formalize the agreement when JD1 returned in about a year’s time. At that time, the purchase price would be based on 2006 market prices. Bodkin moved into the unit and lived there until 2018, making the mortgage payments to JD1.

[9] Bodkin learned through newspaper accounts that JD1 went into the Canadian government’s witness protection programme in 2006. They have had limited contact since then.

[10] This arrangement continued for about 14 years. In April 2018, the mortgagee of the unit, First National Financial Corporation ("First National"), commenced mortgage proceedings regarding the unit. In June 2018, First National advised Mr. Bodkin in writing that it intended to enforce its mortgage and change the locks to the Property on June 27, 2018. Bodkin resisted that attempt while the Respondents appear to have been willing to allow the proceedings to play out.

[11] At one point, Bodkin attempted to pay put the outstanding mortgage, presumably to claim a right of redemption. But as Coats J. wrote in her costs endorsement in First National Financial Corporation v. John Doe, 2020 ONSC 3249, the defendants refused to authorize the mortgagee to accept that payment. Ultimately in 2020 First National succeeded in ousting Bodkin from the unit. It appears that First Mortgage is attempting to have the unit sold.

[12] On July 31, 2018, Bodkin brought this application for an order vesting title to the property to him. As the property was at the time in the process of being sold, he really is seeking the excess proceeds of sale of the unit, after the mortgagee’s claims are paid. If he does not succeed, the Respondents will receive those excess profits.

[13] The Respondents have a very different narrative than that of Bodkin. They claim that it was Bodkin who approached JD1. They say that the parties’ oral agreement was for Bodkin to rent and maintain the unit only. There never was an agreement for him to purchase it. That is why they raise the issue of the Statute of Frauds and its requirement that an agreement for the sale of property be in writing.

[14] Bodkin replies that his claim is an equitable one, rooted in part performance. Part performance is an exception to the Statute of Fraud’s requirement of a written agreement for the sale of real property.

[4] First National Financial (“FNF”) attempted to enforce its mortgage against the property through power of sale. The Plaintiff obtained an order staying FNF’s mortgage enforcement action, which was later lifted by this court. The Plaintiff then moved in the mortgage enforcement action for an order compelling FNF to accept the sum of $106,600 in satisfaction of the mortgage. The Defendants in this action opposed the order and were willing to allow the power of sale to proceed. On February 19, 2020, Coats J. dismissed the motion. FNF took possession of the property and sold it. The excess proceeds are being held to the credit of this action. On May 26, 2020, Coats J. granted costs of $8,500 to the Defendants in this action.

[5] Mr. Bodkin attempted to appeal the Coats J. order to the Court of Appeal for Ontario. It is likely that he appealed to the wrong court, as the defendants assert. The appeal was dismissed. The Registrar of the Court of Appeal granted costs in favour of the defendants of $750.

[6] The Plaintiff says that he was unable to perfect the appeal because the defendants refused to approve his draft order and because the court’s pandemic suspension did not allow him to provide the appellate court with an issued and entered order of Coats J.

[7] Mr. Bodkin has yet to pay the costs levied by either Coats J. or the Court of Appeal. The Defendants’ counsel wrote three times to Plaintiff demanding payment of those costs, without success. On June 16, 2021, the defendants’ counsel also wrote to him requesting proof of assets in Ontario. That letter received no response. Even following service of the Defendants’ motion record, the Plaintiff has not paid the costs. Although he now indicates his willingness to do so.

Jurisdiction to Grant Security for Costs

[8] The jurisdiction to grant security for costs is found in r. 56.01 (1) (c) of the Rules of Civil Procedure, which states:

Where Available

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,

(a) the plaintiff or applicant is ordinarily resident outside Ontario;

(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;

(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;

(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;

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or

(f) a statute entitles the defendant or respondent to security for costs.

[9] Under r. 56.04, “the amount and form of security and the time for paying into court or otherwise giving the required security shall be determined by the court.”

[10] Here, the Defendants rely on r. 56.01(1)(c) and (e).

[11] In Coastline Corporation Ltd. et al v. Cannacord Capital Corporation et al, 2009 21758 (S.C.J.), Master Glustein (as he then was), comprehensively set out the applicable legal principles for the determination of security for costs as follows:

[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);

(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” (Uribe, at para. 12; Shuter v. Toronto Dominion Bank, 2007 37475 (ON SC), [2007] O.J. No. 3435 (S.C.J. – Mast.) (“Shuter”) at para. 76);

(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” (Shuter, at para. 76);

(x) A corporate plaintiff who claims impecuniosity must demonstrate that it cannot raise security for costs from its shareholders and associates, i.e. it must demonstrate that its principals do not have sufficient assets (Smith Bus Lines Ltd. v. Bank of Montreal (1987), 1987 4190 (ON SC), 61 O.R. (2d) 688 (H.C.J.) at 705). Evidence as to the “personal means” of the principals of the corporation is required to meet this onus (Treasure Traders International Co. v. Canadian Diamond Traders Inc., [2006] O.J. No. 1866 (S.C.J.) (“Treasure Traders”), at paras. 8-11). 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. (1493677 Ontario Ltd. v. Crain, [2008] O.J. No. 3236 (S.C.J. – Mast.) at para. 19);

(xi) Consequently, full financial disclosure requires the plaintiff to establish 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 (Morton v. Canada (2005), 2005 6052 (ON SC), 75 O.R. (3d) 63 (S.C.J.) at para. 32);[3]

(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 (Bruno, at pars. 27-28; Shuter, at paras. 59 and 71); and

(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.)).

Analysis

[12] Here, there is no question that two costs orders in favour of the Defendants remain outstanding. The Plaintiff does not claim impecuniosity, although he failed to provide information about his assets in Ontario to satisfy a costs award.

[13] The Plaintiff offers a compelling narrative of personal loss with the illness of his father, which has distracted him from this action and the practice of law (he is a real estate solicitor). He also offers an explanation for the failure to pay costs as a misunderstanding of his legal obligations when he intends to appeal an order. He mistakenly believed that the costs orders were stayed. But had he consulted the Courts of Justice Act, he would be aware that that is not the case.

[14] Further, I note two further relevant considerations. First, the Plaintiff attempted to appeal directly to the Court of Appeal when it appears that the order in question is an interlocutory order, where leave would be required to appeal to the Divisional Court. Second, while the Plaintiff spoke of attempting to reconstitute his appeal, any appeal of the Coats J. order would be moot now as the property has been sold.

[15] While the Plaintiff states that he is willing to pay the costs award he has had plenty of opportunities to do so. Even in the face of this motion, he did not do so. I am not saying that his conduct is contumelious. But that is not the test. In the circumstances, the ongoing failure to pay the two costs awards is sufficient to grant security for costs.

[16] I recognize that the Plaintiff has failed to serve an affidavit of documents as set out in my previous order. While that step must be carried out in accord with my order, that in itself is not proof that this action is frivolous or vexatious. With regard to the merits of this action, I cannot say at this stage that success or failure is obvious.

Conclusion

[17] In conclusion, this is an appropriate case for security for costs. However, as it is at an early stage, a “pay as you go” approach is appropriate. In their factum, the Defendants claim a figure of $99,791.64, which is far from reasonable in the circumstances. What does make sense is to grant security for costs up and including examinations for discovery. The total amount in that regard, as set out in the defendant’s draft bill of costs is $10,104.

[18] The Plaintiff shall post $11,417, inclusive of HST as security for costs up to the completions of examinations for discovery.

[19] While the Defendants’ bill of costs included an amount of this motion of $1,431, that was at an earlier stage of the motion and did not include the attendance. But it presumably included the preparation of materials. I fix costs of this motion at $3,500, payable within 30 days.

“Marvin Kurz J.”

Electronic signature of Justice Marvin Kurz

Date: November 10, 2021