Court File and Parties

COURT FILE NO.: CV-15-520873

MOTION HEARD: 20210114

REASONS RELEASED: 20210205

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

SPOT COFFEE PARK PLACE INC.

Plaintiff

• and-

CONCORD ADEX INVESTMENTS LIMITED

Defendant

BEFORE: MASTER M.P. McGRAW

COUNSEL: G. Low Email: garth.low@garthlow.com

• Counsel for the Defendant

P. Neufeld Email: pneufeld@wagnersidlofsky.com

• Counsel for the Plaintiff

REASONS RELEASED: February 5, 2021

Reasons for Endorsement

I. Introduction

[1] By Order and Endorsement dated August 26, 2015, Master Pope ordered the Plaintiff Spot Coffee Park Place Inc. (“SCPP”) to pay security for costs of $46,000 for all steps in this action including the completion of trial (the “First Order”). A five-day trial is scheduled to commence during the week of March 1, 2021. On this motion, the Defendant Concord Adex Investments Limited (“CAI”) now seeks additional security for costs of $46,225 on a partial indemnity scale.

II. Background

[2] SCPP operated a chain of cafes under the name “Spot Coffee” before ceasing operations in May 2013. CAI develops and builds condominiums. SCPP commenced this action by Statement of Claim issued on January 29, 2015 claiming damages arising from a lease agreement with CAI dated October 29, 2010 (the “Lease”) with respect to premises in one of CAI’s condominium developments located in North York. SCPP alleges that CAI made misrepresentations which induced SCPP to enter in the Lease and ultimately caused SCPP to close this location. SCPP claims general damages of $2,000,000 and $250,000 in punitive damages. CAI has counterclaimed for rental arrears.

[3] On CAI’s first motion for security for costs (the “First Motion”), it sought $81,030 on a partial indemnity scale based on an Estimated Costs Outline of $103,235 dated April 10, 2015 (the “2015 Costs Outline”) providing for client meetings, affidavits of documents, examinations for discovery, undertakings, an undertakings and refusals motion, expert reports, mediation, pre-trial, trial preparation and trial. Pursuant to the First Order, SCPP has posted $16,000 to the end of oral discovery and $30,000 from the completion of oral discovery to the completion of trial. Master Pope reduced CAI’s estimated hours to take into consideration that 65% of counsel’s time would be dedicated to SCPP’s claims with the balance for CAI’s counterclaim; some time answering undertakings would be completed by counsel’s assistant; the possibility that time would not be required for expert reports; and the time claimed for mediation, pre-trial and trial preparation was excessive. SCPP was awarded costs of the First Motion in the amount of $2,000.

[4] All steps in this action other than the trial have been completed. Affidavits of Documents were delivered by January 27, 2016, examinations for discovery were completed on May 24-25, 2016 and mediation was held on May 25, 2018. On February 22, 2019, SCPP brought motions before me for leave to amend its Statement of Claim and to compel CAI to answer refusals (the “SCPP Motions”). The motions were largely resolved through case management and discussions between counsel. SCPP was granted to leave to amend its Statement of Claim and CAI was ordered to make best efforts to answer the undertakings and approximately 6 refusals at issue. On November 8, 2019, SCPP conducted another examination of CAI’s deponent based on the questions initially refused.

[5] The parties attended a pre-trial conference on September 18, 2020 and scheduled a five-day trial starting March 1, 2021 shortly thereafter. CAI brought this motion on October 20, 2020.

III. The Law and Analysis

[6] The court has the discretion to order security for costs if it is satisfied that it appears there is good reason to believe that the matter comes within one of the circumstances enumerated in Rule 56.01(1)(Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (ONSC) at para. 7). Rule 56.01(1) does not create a prima facie right to security for costs. Rather it triggers an inquiry where the court, using its broad discretion, considers multiple factors to make such order as is just in the circumstances including the merits of the claim, the financial circumstances of the plaintiff and the possibility of an order for security preventing a bona fide claim from proceeding (Stojanovic v. Bulut, 2011 ONSC 874 at paras. 4-5).

[7] Pursuant to Rule 56.07, the amount of security required by an order for security for costs may be increased or decreased at any time.

[8] In Yaiguaje v. Chevron Corp., 2017 ONCA 827, the Court of Appeal held that while the court is obliged to consider the specific provisions of the Rules regarding security for costs, it must effectively take a step back and consider the justness of the order sought in all the circumstances with the interests of justice at the forefront:

“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.” (Yaiguaje at paras. 22-25).

[9] The justness of a security for costs order requires a balancing between ensuring that meritorious claims are allowed to go forward with the consequences of being unable to collect costs where a party pursues an unsuccessful claim and the prospect of an unenforceable costs judgment (Ascent Inc. v. Fox 40 International Inc., [2007] O.J. No. 1800 at para. 3; Rosin v. Dubic, 2016 ONSC 6441 at para. 39).

[10] The following principles and factors apply to a motion for increased security for costs under Rule 56.07:

(i) a second motion for security for costs will not succeed unless there is an unforeseen and material change in circumstances since the first order for security. An example of an unforeseen and material change in circumstances might be where a plaintiff has come into a sum of money sufficiently large that they could no longer make an impecuniosity argument;

(ii) the defendant seeking increased security bears the onus of demonstrating a significant gap between the security ordered and the actual expenses which were not foreseeable and that in hindsight the original request for security for costs was based on an assessment of the complexity of the case which hindsight has established was not realistic;

(iii) the jurisdiction to increase or decrease the amount of security already ordered should not be exercised lightly or be used to second guess the court that made the original order, whether on consent or otherwise, unless the gap between what was ordered and what later appears to be necessary is significant (Bexley Trading Inc. v. Ottawa Health Research Institute, [2007] O.J. No. 196 (Sup. Ct.) at paras. 8-10; 1286342 Ontario Inc. v. Dennis, 2012 ONSC 731 at para. 18; Harding v. Neinstein, [2003] O.J. No. 3510 (Sup. Ct.) at para. 11; Modine Manufacturing Co. v. Rose Corp., 2003 72349 (ON SC), 2003 CarswellOnt 2555 at para. 24; Websports Technologies Inc. v. Cryptologic Inc., [2005] O.J. No. 1320 (Sup. Ct.) at paras. 6-7).

[11] For the reasons set out below, I conclude that it is just in all of circumstances that CAI’s motion be dismissed.

[12] It is important to emphasize that CAI is seeking security for costs for some of the same steps for which security has already been ordered. This is not the more typical situation where a defendant is granted security for some but not all steps in the litigation and then brings a subsequent motion to seek security for upcoming steps not previously ordered. CAI seeks an additional $46,225 for trial preparation and a 5-day trial, steps for which security for costs was awarded in the First Order.

[13] While SCPP suggested that CAI is required to re-establish its entitlement to security for costs, the parties did not make substantive submissions on this point. In any event, SCPP acknowledges that there is no new evidence with respect to its financial circumstances or ability to pay a costs award since the First Motion. CAI submits that there is a material change in circumstances because the costs it has incurred to date are significantly higher than estimated at the time of the First Motion which is largely attributable to SCPP’s amendments to its Statement of Claim. CAI argues that the addition of new allegations regarding misrepresentations related to condominium sales resulted in these material and unforeseen costs. CAI asserts that it has incurred fees and disbursements of $76,510.97 to date such that even if it were ultimately awarded partial indemnity costs of this action, its current fees it would already account for substantially all of the security posted under the First Order. In CAI’s Estimated Costs Outline dated October 2020, its estimated costs of $46,225 are comprised of $1,500 for this motion; $9,000 for preparation of Requests to Admit, notices and document briefs; $9,000 for trial preparation; and $18,000 for trial attendance.

[14] Although CAI bears the onus on this motion, it has not provided any evidence or explanation as to how any of its costs of $76,510 were incurred, how all of the security paid under the First Order has been effectively “spent” and most importantly, any evidence in support of its claim that the additional costs resulted from SCPP’s pleading amendments. CAI’s counsel acknowledged that no breakdown or allocation of the additional costs is available and was unable to provide any explanation or assistance to the court. Without these particulars, I am unable to assess the amount of CAI’s additional costs, whether they were incurred as a result of the pleadings amendments or other steps, whether they were reasonable in the circumstances and how they compare to the security ordered for the same steps in the First Order. In addition, I am unable to determine if any of the additional costs were incurred by CAI in unsuccessfully opposing the SCPP Motions and attending the examination for discovery which was necessitated by its refusals.

[15] The record before me demonstrates that this action has progressed largely as contemplated on the First Motion and in the 2015 Costs Outline. I cannot conclude that it has increased in complexity or that there have been any material changes in circumstances, including as a result of SCPP’s pleadings amendments. CAI’s own estimate of 30 hours for trial attendance in the 2015 Costs Outline is in line with the 5-day trial now scheduled. The only steps which were not contemplated on the First Motion were the SCPP Motions, which I am not satisfied are material and which CAI opposed and the additional examination which was necessitated by CAI’s refusals. There are also steps for which security was granted which did not occur including 30 hours for expert reports and an undertakings and refusals motion by CAI.

[16] Accordingly, CAI has not satisfied its onus that there has been a material and unforeseen change in circumstances since the First Order was granted or that there is a significant gap between the previous security ordered that in hindsight was unrealistic. Without any evidence or particulars, CAI’s motion is reduced to a bald request for additional security because it has already “spent” the amounts ordered and is now looking for a significant “top up” for trial preparation and trial. To do so would not only be unjust in the circumstances but it would be to second guess the First Order particularly given the reduction of CAI’s request on the First Motion from $81,200 to $46,000. Defendants are not entitled to a second shot at obtaining higher security for the same steps solely on the basis that the original order has turned out to be insufficient. Particulars as to the amount and nature of the costs incurred are required.

[17] The timing of this motion is also problematic and further supports its dismissal. This motion was brought after all steps except for trial had been completed, an important consideration in the justness of the security requested. I agree with Master Fortier’s recent comments in Wilson Young & Associates Inc. v. Carleton University et al., 2020 ONSC 4542 that the failure to provide an explanation for delay can be fatal to a security for costs motion even in the absence of prejudice to the plaintiff (Wilson Young at para. 61).

[18] CAI submits that it did not bring this motion sooner because it believed that the action would settle until SCPP set it down for trial. CAI claims that it was delayed further due to the suspension of regular court operations as a result of the COVID-19 pandemic and then had to wait until the pre-trial to confirm trial length.

[19] I do not accept CAI’s explanations. Even accepting CAI’s unsupported assertion that SCPP’s pleadings amendments gave rise to significant additional costs, it could have brought this motion reasonably soon after the SCPP Motions and certainly before the end of 2019. It was not reasonable or necessary for CAI to wait and see if this action would settle or be set down for trial and then wait until after the pre-trial. The parties have been litigating this action for over 5 years and as noted above, CAI’s estimate of 30 hours for trial in 2015 is consistent with the 5 days now scheduled. The effect of CAI’s delay is that SCPP is faced with a potential doubling of security on the eve of trial which threatens to disrupt its right to see its trial-ready action through to completion. This kind of last-minute motion for security is one of the situations which the Court of Appeal intended to address in Yaiguaje, which is more pronounced in the present circumstances where CAI already has the benefit of security. In balancing the parties’ interests and considering the justness of the order sought, I conclude that the timing of this motion militates against granting additional security. In my view, SCPP’s right to prepare for and go to trial without the uncertainty of having a request for additional security sprung on them at the last minute (particularly when it could have been brought much sooner) outweighs the limited risk to CAI of having some of a costs award unenforceable given the existing security.

[20] With reference to the examination for discovery transcripts, the Lease and the Lease negotiations, CAI argues that SCPP has a weak claim on the merits because it cannot demonstrate that there were any misrepresentations. The merits are a consideration on every security for costs motion along a continuum depending on the circumstances of each case (Coastline at para. 7). The court is not required to embark on an analysis such as on a summary judgment motion and if the case is complex or turns on credibility, it is generally not appropriate to assess the merits except where it can be done properly or failure appears obvious (Coastline at para. 7).

[21] In my view, the merits hold little relevance on this motion. This is a second motion for security for costs where SCPP is not claiming impecuniosity and the basis for awarding security was argued and established at the First Motion. Even considering CAI’s arguments on the merits, I decline to make any findings. The underlying issues in this action relate to alleged misrepresentations which largely turn on credibility. Success or failure does not appear obvious and the merits of the disputed issues are beyond the scope of this motion and more appropriately left for trial.

[22] Applying a holistic approach, having considered all of the relevant factors and balanced the parties’ respective interests, I conclude that the overriding interests of justice in the circumstances require that CAI’s motion be dismissed.

IV. Disposition and Costs

[23] Order to go dismissing CAI’s motion.

[24] If the parties cannot agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines) with me through the Masters’ Administration Office on a timetable to be agreed upon by counsel. If counsel cannot agree, they may schedule a telephone case conference to speak to one.

Released: February 5, 2021

Master M.P. McGraw