COURT FILE NO.: CV-21-660498

RELEASED: 2022/06/17

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Shumei Luo v. Peter Grigoras, Grigoras Consulting Inc. formerly known as Peter Grigoras Consulting Inc., Yongjin Ouyang and Xing Ouyang also known as Jenny Ouyang

BEFORE: Associate Justice Graham HEARD: June 15, 2022

APPEARANCES: Khaled Gheddai for the plaintiff Paul Starkman and Calvin Zhang for the Ouyang defendants (moving parties) Victoria Pileggi for the defendants Peter Grigoras and Grigoras Consulting Inc.

ENDORSEMENT

(Re: Motion by the Ouyang defendants for security for costs)

1The plaintiff Shumei Luo’s claim against the moving defendants Yongjin Ouyang and Jenny Ouyang is for $188,157.53 owing on a loan of $200,000.00 made on July 26, 2018 to a non-party Atlas Healthcare (Richmond Hill) Ltd. and guaranteed by the defendant Peter Grigoras. This is one of a series of loans that are the subject of the action against Mr. Grigoras and is referred to in the pleading as “the Second Loan”.

2Ms. Luo’s claim against the Ouyang defendants is contained solely in the following pleading (para. 15 of the statement of claim):

15 At the request of Grigoras and his then-girlfriend, Jenny [Ouyang], the Plaintiff provided the loan proceeds of $200,000.00 to Jenny and her father, Yongjin, such that Jenny and Yongjin became jointly and severally liable, along with Grigoras, to the Plaintiff for repayment of all amounts due under the Second Loan.

3The Ouyang defendants now bring this motion for an order that the plaintiff post security for costs, relying on subrules 56.01(1)(a) and (e):

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; . . .

(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;

4I will address the motion based on each of these two subrules.

Rule 56.01(1)(a) – “plaintiff ordinarily resident outside Ontario”

5On August 16, 2021 counsel for the Ouyang defendants sent a demand in writing to plaintiff’s counsel under rule 56.02 that counsel “declare in writing whether the plaintiff or applicant is ordinarily resident in Ontario”. Counsel for the Ouyang defendants also requested that plaintiff’s counsel advise whether the plaintiff has sufficient assets in Ontario to satisfy a costs award, and to provide evidence both of residency in Ontario and of her assets. On the same date, plaintiff’s counsel replied that the plaintiff was ordinarily resident in Ontario but provided no evidence of either residency or assets. In response to a further request on August 19, 2021 to provide evidence of the plaintiff’s residency and assets, plaintiff’s counsel again refused.

6Rule 56.02 does not require plaintiff’s counsel to do anything but declare whether the plaintiff is ordinarily resident in Ontario and specifically, does not require counsel to provide any evidence in that regard. Also, there is no Rule of Civil Procedure that requires a plaintiff to respond to a defendant’s demand to disclose assets in Ontario prior to judgment.

7The moving defendants’ initial onus on a security for costs motion under rule 56.01(1)(a) is set out in Shibish v. Scher, 2013 ONSC 4452 (at para. 7):

7 Caselaw is clear that the defendants must satisfy the onus that the plaintiff is “ordinarily resident” outside of Ontario on the basis of proven facts rather than “mere conjecture, hunch or speculation” (MacKinnon v. A.J. Bus Lines, 2010 ONSC 2802). The Court must be satisfied on the balance of probabilities that the plaintiff is ordinarily resident outside of Ontario.

8With respect to the plaintiff’s place of residence, the Ouyang defendants rely solely on the supporting affidavit of one of their lawyers stating that “I was advised by Jenny [Ouyang] that the Plaintiff, Shumei Luo may not currently lived [sic] in Ontario” (para. 2) and “It appears that the Plaintiff is not an ordinarily resident [sic] of Ontario” (para. 9).

9Ruling: The statement that plaintiff’s counsel has been advised by Jenny Ouyang that Ms. Luo “may not currently live in Ontario” is vague and speculative and does not even approach the “proven facts” that would satisfy the Court on the balance of probabilities that Ms. Luo is ordinarily resident outside of Ontario. Accordingly, the Ouyang defendants have failed to meet their initial onus and the plaintiff has no case to respond to.

10Nonetheless, the plaintiff has provided affidavit evidence that she has lived in Ontario since 1999, that she has a current Ontario driver’s licence, and that she has been an owner of the residence indicated on her driver’s licence since September, 2003 and the sole owner of that residence since July, 2011. Accordingly, the only evidence of the plaintiff’s residency before the court supports her contention that she is ordinarily resident in Ontario. This evidence reinforces my conclusion that the plaintiff Ms. Luo cannot be subject to a security for costs order on the basis of her residency.

Rule 56.01(1)(e) – “good reason to believe that the action is frivolous and vexatious and that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs”

11Reading subsection 56.01(1)(e) together with the preamble to the rule, the Ouyang defendants must demonstrate both that “it appears that” there is good reason to believe that the action is frivolous and vexatious and that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.

12In Ilitchev v. Yevstigneev, 2004 CanLII 33021, Master MacLeod (as he then was) addressed the question of what constitutes a frivolous and vexatious action (at para. 18):

18 What is an action that the court believes may be frivolous and vexatious? No one thing defines such an action but in my view a frivolous action is an action that appears so highly unlikely to succeed that it is apparently devoid of practical merit. [emphasis added]

13With respect to the contention that their action is frivolous and vexatious, the defendants rely on the plaintiff’s own pleadings in the statement of claim, as follows:

• By loan agreement dated July 26, 2018, the plaintiff Ms. Luo loaned $200,000.00 to Atlas Healthcare (Richmond Hill) Ltd., which was owned, operated and controlled by the defendant Peter Grigoras (paras. 11 and 13);
• Grigoras provided the plaintiff with a written unconditional guarantee of the loan whereby he was liable as principal debtor (para. 14);
• “At the request of Grigoras and his then-girlfriend, Jenny [Ouyang], the Plaintiff provided the loan proceeds of $200,000.00 to Jenny and her father, Yongjin, such that Jenny and Yongjin became jointly and severally liable, along with Grigoras, to the Plaintiff for repayment of all amounts due under the Second Loan.” (para. 15 also quoted above)

14Based on these pleadings, which are the only pleadings against them, the Ouyang defendants submit that the plaintiff herself alleges that the original loan of $200,000.00 was to Atlas Healthcare (Richmond Hill) Ltd. and guaranteed by the defendant Peter Grigoras, and there is no pleaded basis for liability on them.

15The Ouyang defendants also rely on a letter dated July 28, 2018 from the plaintiff Shumei Luo to “Borrower: Atlas Healthcare (Richmond Hill) Ltd. with personal Guarantees by: Peter Grigoras” that confirms that the funds were advanced to and received by Yongjin Ouyang. In this letter, Ms. Luo also states:

“As I understand these funds is [sic] part of your partial payment to Jenny O for her own investment with Atlas; however this is the subject of our loan agreement between yourself and myself with terms and conditions set-out with the obligation that you will repay this fund back to me as per our own loan agreement attached from your own sources.” [emphasis added]

16With respect to the second part of rule 56.01(1)(e), the Ouyang defendants submit that they do not have to demonstrate that the plaintiff has insufficient assets to pay costs. This is incorrect. The defendants seeking an order for security for costs must satisfy both components of this subrule.

17The Ouyang defendants’ counsel then referred to the fact that Ms. Luo states in her affidavit that “there are no mortgages or charges currently registered on the Property”, but the parcel register attached as an exhibit shows two undischarged mortgages for $271,577.00 and $300,000.00. The transfer document reflects a purchase price of $394,976.24 (in 2003) but there is no evidence as to the current value of the property or of Ms. Luo’s equity in the property.

18The Ouyang defendants also rely on the decision of Sharma J. dated May 31, 2021 in Canada Grace Park Ltd. v. Grigoras, 2021 ONSC 3934. Canada Grace, a corporation of which Jenny Ouyang is the sole director, officer and shareholder, brought an action against Peter Grigoras and Atlas Healthcare (Brampton) Ltd. and sought summary judgment for repayment of two $500,000.00 loans. In his ruling on the summary judgment motion, Sharma J. quotes Ms. Luo’s letter of July 28, 2018 to Atlas Healthcare (Richmond Hill) Ltd. and Mr. Grigoras referred to above and ordered that the $200,000.00 provided by Grigoras to Jenny Ouyang through the transfer to her father Yongjin Ouyang on July 27, 2018 be set off against the loans from Canada Grace to Grigoras.

19The defendants pleaded Sharma J.’s order of May 31, 2021 in their statement of defence (para. 9):

9 By Justice Sharma’s Order dated May 31, 2021, the $200,000.00 owed by Jenny O [Ouyang] to Grigoras was set off against a debt owed by Grigoras to Jenny Ou’s [Ouyang’s] company.

20The defendants submit that, based on Sharma J.’s finding that the $200,000.00 transferred to Yongjin Ouyang on July 27, 2018 was a loan from Grigoras using funds he received from the plaintiff Lao, Lao has no right of recovery from the Ouyang defendants.

21The plaintiff submits that there is a meritorious claim against the Ouyang defendants because they benefited from the funds which were transferred to Yongjin Ouyang at the request of Jenny Ouyang.

22The plaintiff also submits that her July 28, 2018 letter should be given no weight because it was not previously disclosed. This argument has no merit. Ms. Lao cannot claim to be taken by surprise by her own letter and in any event, the letter was contained in the Ouyang defendants’ motion record served in September, 2021.

23Finally, the plaintiff submits that the ruling of Sharma J. in Canada Grace Park Ltd. v. Grigoras, supra cannot be binding on her because she was not a party to that proceeding.

24Ruling: There is no basis at law for the plaintiff’s assertion that simply by receiving the loan proceeds of $200,000.00, the Ouyang defendants became jointly and severally liable to the plaintiff for repayment of that loan. The loan was clearly from Ms. Luo to Atlas Healthcare (Richmond Hill) Ltd. and guaranteed by Mr. Grigoras. Ms. Luo does not allege any contract whereby the Ouyang defendants agreed to repay her, either by way of a guarantee or otherwise.

25Further, Ms. Luo herself, in her signed note of July 28, 2018 to Atlas Healthcare (Richmond Hill) Ltd. and Peter Grigoras, understood that the $200,000.00 advanced to Yongjin Ouyang on July 27, 2018 was partial payment by Mr. Grigoras to Jenny Ouyang for her own investment with Atlas Healthcare, and confirmed that these funds were “the subject of our loan agreement between yourself and myself . . . with the obligation that you will repay this fund back to me as per our own loan agreement . . . .”

26Essentially, Ms. Luo was telling Mr. Grigoras that regardless of what he did with the $200,000.00 in loan funds, he and Atlas Healthcare were still responsible for repaying that loan. There was no suggestion that the transfer of funds to Yongjin Ouyang created any liability on him and Jenny Ouyang.

27Based on both the plaintiff’s pleading and her own communication of July 28, 2018, the loan agreement in respect of the $200,000.00 loan is between the plaintiff Shumei Luo as lender, and Atlas Healthcare (Richmond Hill) Ltd. as borrower and Peter Grigoras as guarantor. The fact that the funds that were the subject of that loan were channelled to the Ouyang defendants would not make them liable to the plaintiff Luo for repayment of the loan. There appears to be no legal or factual basis on which the Ouyang defendants could be liable for repayment of Ms. Luo’s $200,000.00 loan to Atlas Healthcare (Richmond Hill) Ltd.. Applying Ilitchev, supra, the plaintiff’s action against the Ouyang defendants appears so highly unlikely to succeed that it appears to have no practical merit. It therefore appears to be frivolous and vexatious, so the plaintiff has satisfied the first of the two criteria in rule 56.01(1)(e). My ruling in this regard does not rely on Sharma J.’s ruling in Canada Grace Park Ltd. v. Grigoras, supra.

28The plaintiff relies on her affidavit sworn June 6, 2022 both to substantiate her residency on the basis of her Ontario driver’s licence and her ownership of 10 Ferncliffe Crescent, Markham, Ontario, and to demonstrate that she has sufficient assets in Ontario to pay the Ouyang defendants’ costs. The Ouyang defendants may therefore rely on the same evidence to challenge the sufficiency of the assets.

29Ms. Luo deposes that “there are no mortgages or charges currently registered on the Property” (at 10 Ferncliffe Crescent), despite the fact that the parcel register, which is an exhibit to the affidavit, reflects two outstanding charges on the property for $271,577.00 and $300,000.00. There is no specific evidence as to the current status of these two charges, including the amount or amounts of any outstanding balances. Most importantly, there is no evidence as to the value of the plaintiff’s current equity in the property. There is therefore no cogent evidence that the plaintiff has sufficient assets in Ontario to pay any costs awarded to the Ouyang defendants.

30Accordingly, the Ouyang defendants have demonstrated that it appears that there is good reason to believe that the plaintiff’s action against them is frivolous and vexatious and that the plaintiff does not have sufficient assets in Ontario to pay any costs awarded against her. The Ouyang defendants are therefore entitled to an order for security for costs.

31Amount of security: In their factum, the Ouyang defendants seek an order that the plaintiff post security for costs of $25,000.00 for costs incurred to date, and the discovery portion of the action or the proposed summary judgment motion. I accept that the figure of $25,000.00 represents reasonable security for these steps in the action. Accordingly, the Ouyang defendants shall post security for costs of $25,000.00 with respect to the steps completed in the action, and summary judgment or documentary and oral discovery, within 60 days.

32Plaintiff’s proposed motion for a discovery plan: At a case conference on September 3, 2021, Brown J. ordered that the issue of whether affidavits of documents should be exchanged before any summary judgment motion is heard should be determined by an Associate Judge. After failing to book their motion when the Ouyang defendants booked their security for costs motion, plaintiff’s counsel attempted to “walk in” the motion to be heard with the security for costs motion but I was not prepared to hear it on that basis. I will address the issue of whether affidavits of documents should be exchanged before the summary judgment motion at a case conference to be arranged with my ATC.

33Costs: The Ouyang defendants and the plaintiff have respectively uploaded a costs outline and a bill of costs to CaseLines. For their assistance, my preliminary view, without receiving the parties’ submissions, is that the Ouyang defendants should recover costs reflecting their success on the motion but that their costs should be reduced to take into account their unmeritorious position that the plaintiff is not ordinarily resident in Ontario. Further, the Ouyang defendants’ partial indemnity costs in their counsel’s costs outline are based on approximately $11,000.00 in fees, which is excessive for a motion which involved no cross-examinations and was argued in less than two hours. The fees of $6,275.25 in the plaintiff’s bill of costs are within a reasonable range for this motion.

34I encourage counsel to come to an agreement with respect to the costs of the motion based on the guidance provided. If they cannot agree, the Ouyang defendants shall file a written submission within 20 days and the plaintiff shall file a responding submission within 40 days. Costs submissions shall not exceed three pages and shall not attach case law.