COURT FILE NO.: 31-2117602

DATE: 2022 05 02

SUPERIOR COURT OF JUSTICE – ONTARIO IN BANKRUPTCY

IN THE MATTER OF THE BANKRUPTCY OF ALAN SASKIN

OF THE CITY OF TORONTO, IN THE PROVINCE OF ONTARIO

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

COUNSEL:

R. Battista Frino for Moving Party Creditor Alpa Stairs. (“Alpa”)

Trustee, Fuller Landau Group Inc. (the “Trustee”) taking no position on Motion, and not attending

Joshua Tayar for Bankrupt Alan Saskin (the “Bankrupt”)

HEARD: February 8, 2022

E N D O R S E M E N T

The Procedural Context:

[1] This Motion by Alpa (the “Motion”) brought on December 22, 2021 is for an Order compelling the Bankrupt to pay into Court the sum of $22,029.35 or in the alternative, such other amount as the Court deems is just, as security for the partial indemnity costs of the Creditor, Alpa, within fifteen days of the date of the Order requested.

[2] The Bankrupt filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act (the "BIA") on April 29, 2016 appointing The Fuller Landau Group Inc. as the Trustee.

[3] On October 27, 2016, a Holding Proposal was filed with the Official Receiver. A meeting of creditors to consider the Holding Proposal was adjourned without a fixed date by the creditors. In May 2019 the Bankrupt was assigned into bankruptcy and the Trustee became the Bankruptcy Trustee of the Bankrupt.

[4] The Bankrupt was the manager of numerous corporations and partnerships which developed condominiums in or about the City of Toronto.

[5] Many of these entities filed notices of intention, and later, obtained a stay of proceedings under the Companies' Creditors Arrangement Act ("CCAA"). KSV Kofman Inc. ("KSV") is the monitor appointed by the Court for many of these corporations or other entities.

[6] Prior to the Bankruptcy Alpa had commenced an Action by issuing a Statement of Claim on February 26, 2016 against the Bankrupt personally and two corporations (the “Alpa Saskin Claim”) alleging inter-alia that:

"10. Alpa states that the revenue and payments received by Urbancorp

and the Defendants in relation to the Projects that used Alpa's materials are impressed with a trust in favour of Alpa. Full particulars of these trust payments and the Projects are within the knowledge of the Defendants.

11. Saskin is an officer, director or person with effective control of the affairs of Urbancorp, and was a fiduciary of Alpa with respect to funds received by him. He assented to, or acquiesced in, conduct that he knew or reasonably ought to have known amounted to a breach of trust and are personally, jointly and severally, liable to Alpa for such breaches pursuant to section 13 of the Construction Lien Act."

The Alpa Saskin Claim is Exhibit E to the Hanson S.38 Affidavit (as defined below) and Exhibit A to the Saskin Supplementary Affidavit (as defined below).

[7] Alpa has filed a Proof of Claim (the “Alpa Proof of Claim”) in the proposal proceedings of the (now) Bankrupt dated November 14, 2016 which states that it is "based on an indebtedness to Alpa "…in the sum of $244,727.68, as specified in the reports attached and marked as Schedule "A" to the Proof of Claim”. The Alpa Proof of Claim then was filed in the Bankruptcy Estate upon the Bankruptcy occurring.

[8] Unfortunately the copy of the Alpa Proof of Claim at Exhibit G to the Hanson s.38 Affidavit, which is the only copy provided by Alpa in the materials before me, is missing the Affidavit of Zena Hanson sworn May 14, 2016 in support of the Alpa Proof of Claim at Schedule A (the “Hanson Proof of Claim Affidavit”), only attaching exhibits. Fortunately for Alpa, the complete Alpa Proof of Claim, including the Hanson Proof of Claim Affidavit, was entered into evidence by the Bankrupt at Exhibit A to the Saskin Expungement Affidavit (as defined below).

[9] The Hanson Proof of Claim Affidavit states the basis for the claim by Alpa against the Bankrupt:

“5. Alpa rendered invoices in the amount of $33,083.39 to the Urbancorp Companies with respect to the Edgewood Avenue Project which remain outstanding.

Curzon Street Project

6. Alpa supplied and installed railings and stairs and provided services and materials with respect to the property municipally known as 50 Curzon Street, Toronto ("Curzon Street Project").

7. Alpa rendered invoices in the amount of $179,860.26 to the Urbancorp Companies with respect to the Curzon Street Project which remain outstanding.

8. Revenue and payments received by the Urbancorp Companies In relation to the Projects that used Alpa's materials are impressed with a trust in favour of Alpa,

9. Alan is an officer and director of the Urbancorp Companies is thus personally liable under section 13 of the Construction Lien Act for any breach of trust with respect to the funds received for the Projects.

10. Alpa is owed the sum of $244,727.68 as a secured creditor calculated as follows: Principal Amount Owing $212,943.85

DAYS from September 15, 2015 lo April 29, 2016 227

Rate of interest in accordance invoices rendered, and alternatively the Courts of Justice Act. 24

Interest accrued to April 29, 2016. $31,784.03

Total $244,727.68

Attached and marked as Exhibit "A" is a trial balance for the Urbancorp Companies.”

[10] The Trustee has allowed the Alpa Proof of Claim in full. There are minimal assets in the Bankruptcy Estate of the Bankrupt.

[11] Registrar Jean granted an Order dated December 14th, 2020 under Section 38 of the BIA in favour of Alpa (the “S.38 Order”). The Trustee consented to Alpa bringing of Motion to obtain the S.38 Order on the basis that there were insufficient funds in the estate for the Trustee to commence or continue an action against the Bankrupt, members of his family and other alleged non-arms length parties, to set aside certain transactions and obtain the proceeds of sale of a wine collection (the “S.38 Action”). The S.38 Action was commenced by Alpa on May 7, 2021. To the date of the hearing of this motion, it is the evidence of Alpa in the Hanson Affidavit (as defined below) that 5 creditors joined Alpa in prosecuting the S.38 Action.

[12] The Bankrupt has brought a motion dated August 26, 2021 for an order expunging, or in the alternative reducing, the Alpa Proof of Claim under s.135(5) of the BIA (the “Expungement Motion”). The basis for the Expungement Motion as stated in the Notice of Motion of the Bankrupt is:

“6. There is no legal or factual support or basis for Alpas's [sic] Proof of Claim. Alternatively, the amount claimed is excessive.”

[13] In his Affidavit in support of the Expungement Motion, (the “Saskin Expungement Affidavit”) the Bankrupt states:

“2. Attached hereto and marked as Exhibit "A" is a true copy of the November 14, 2016 Proof of Claim of Alpa Stairs and Railings Inc. ("Alpa"). As can be seen from the Proof of Claim, it states that it is "based on an indebtedness to Alpa "in the sum of $244,727.68, as specified in the reports attached and marked as Schedule "A" to the Proof of Claim". Attached as Schedule "A" to the Proof of Claim is a document titled Detail Historical Aged Trial Balance of Alpa which shows Alpa's customer referenced as Urbancorp 009. It does not indicate that the Bankrupt is a debtor in that ledger, nor in the attached Construction Lien Claims which state that the claim is asserted against Urbancorp (Leslieville) Developments Inc. and Urbancorp (The Beach) Developments Inc. (the "Projects").

3. Notwithstanding that the Proof of Clam asserts no claim of personal liability on the part of the Bankrupt, in an affidavit sworn November 30, 2020, which has recently been received by the Bankrupt, Zena Hanson, the "Manager of the Legal and Credit Department" of Alpa, asserts a personal claim on the basis of an alleged breach of trust under the Construction Lien Act. Attached to her affidavit is a statement of claim issued on February 26, 2016, alleging a breach of trust.

4. Contrary to what is pleaded in paragraph 11, I did not receive any funds in relation to the Projects that used Alpa's materials. Nor did I assent to, or acquiesce in, any conduct that amounted to a breach of trust. I am not aware of any breach of trust in relation to these Projects.

5. On or about May 16, 2016, the Projects went into receivership at the request and upon the application of the Canadian Imperial Bank of Commerce because of cost overruns. The Projects were only partially built at the time.

6. Following its appointment, the receiver, Alvarez and Marsal, completed the Projects over the following four years. All revenues received by the receiver and disbursed by it were done with court approval. Included in such disbursements were payments by the receiver to Alpa of $94,152.23.

7. I am not aware of any revenue or payments that were used for any purpose other than proper payments made in respect of the Projects.”

[14] Alpa has brought this security for costs Motion in response to the Expungement Motion.

Evidence of Alpa on the Motion

[15] The evidence on the Motion for Alpa was provided by Zena Hanson the Manager of the Legal and Credit Department of Alpa, in an affidavit sworn on December 22, 2021 (the “Hanson Affidavit”). Attached as Tab 3 to Motion Record of Alpa for the Motion was the Affidavit of Zena Hanson sworn for the s.38 motion to obtain the S.38 Order (the “Hanson S.38 Affidavit”), but lacking the exhibits. Separately on this Motion Alpa filed the entire Motion Record used for the S.38 Order, including the Hanson S.38 Affidavit and all exhibits.

[16] Also separately on this Motion Alpa, at some point, uploaded to Caselines the Affidavit of Guy Gissin (“Gissin”) affirmed October 15, 2018 in the CCAA proceedings of Urbancorp (the “Gissin Affidavit”). As noted in the Gissin Affidavit Gissin states:

“1. I am the Israeli Court-appointed functionary officer and foreign representative (the "Functionary") of Urbancorp Inc. ("UCI") and the assignee of the claims of the holders of bonds issued by (the "Bondholders").

2. This affidavit is made in support of the position of KSV Kofman Inc. ("KSV"), the monitor ("Monitor") of the Applicants in this proceeding, requesting that this Honourable Court uphold the disallowance of the claim of Terra Firma Capital Corporation ("TFCC") as against the Applicants.”

[17] Gissin is one of the 5 creditors mentioned in the Hanson Affidavit as participating in the S.38 Action, but did not appear in this proceeding, and his Motion regarding his standing to appear on the Expungement Motion was heard by me subsequently.

[18] The Relevant portions of the Hanson Affidavit are:

“2. This motion concerns ALPA's claim against the Bankrupt, Alan Saskin ("Saskin").

3. I swore a previous affidavit in support of ALPA's motion for a Section 38 Order on November 30, 2020 ("First Affidavit") and I rely on the statements in that Affidavit in support of the within motion for security for costs. My first Affidavit is found at Tab 3.

4. As indicated in my First Affidavit, the Trustee consented to the bringing of the Section 38 Order. I am advised by Emilio Bisceglia, Counsel for ALPA and do verily believe that there were insufficient funds in the estate for the Trustee to pursue the claim against Saskin and, as such, ALPA brought the motion. Attached and marked as Exhibit "A" to this my Affidavit is a copy of the Order of Registrar Jean, dated December 14th, 2020.

5. On or about January 4, 2021, pursuant to the Order, we served all creditors of Saskin's Estate with a copy of the Order. Attached and marked as Exhibit "B" is a copy of the letter from ALPA's Counsel to all creditors serving the Order, dated January 4, 2021.

6. The following creditors have joined under the Section 38 Order:

(a) Dorval Mechanical Contractors Ltd.

(b) Speedy Electrical Contractors Inc.

(c) Downing Street Financial Inc.

(d) Franline Investments Inc.

(e) Guy Gissen, in his capacity as the Israeli Functionary of Urbancorp. Inc.

7. Pursuant to the Order, a Statement of Claim was issued against Saskin and other family members who received transfers at undervalue. Attached and marked as Exhibit "C" is a copy of the Statement of Claim, for the action bearing Court File No. CV-21-00661911-0000, issued on May 7, 2021.

8. Saskin has responded with a motion for a S. 135 Motion. Attached and marked as Exhibit "D" is a copy of a letter dated August 16, 2021 from Fred Tayer, Counsel for Saskin, attaching the special request from.

9. Saskin has since served a Motion Record for the S. 135 Motion.

10. On or about September 8, 2021, ALPA's Counsel responded indicating that the S. 135 Motion is improper as it is a collateral attack on the Section 38 Order. Mr. Bisceglia also advised that there are other creditors that joined under the Section 38 Order. Attached and marked as Exhibit "E" is a copy of Mr. Bisceglia's letter dated September 8, 2021.

11. There will likely be cross-examinations and oral evidence at the S 135 Motion, therefore, the costs to defend this motion will quickly accumulate.”

[19] As part of its grounds for the Motion, Alpa has raised in the Hanson Affidavit and the Alpa Factum the issue that “that the S. 135 Motion is improper as it is a collateral attack on the Section 38 Order”. The Relevant Portions of the Hanson S.38 Affidavit incorporated in the Hanson Affidavit, including the Alpa Proof of Claim at Exhibit G, are:

“The Background:

3 From in or about 2014 to 2015, Alpa provided services and materials as stair and railing contractor to Urbancorp (The Beach) Developments Inc. and Urbancorp (Leslieville) Developments Inc. (collectively "Urbancorp") in connection with two construction projects known as: (1) the 50 Curzon Street Project ("Curzon") (2) 42 Edgewood Project ("Edgewood") (collectively "the Projects") pursuant to construction contracts entered into with Urbancorp.

4. Prior to the Insolvency proceedings, Urbancorp carried on business as land developers principally focused on development, construction and sale of residential projects in the Greater Toronto Area. Saskin is the officer and director of Urbancorp.

5. ALPA issued various invoices to Urbancorp for the services and materials it provided which remain outstanding in the sum of $33,083.39 for Edgewood and $179,860.26 for Curzon (collectively the "Unpaid Invoices").

6. Despite repeated requests for payment, Urbancorp failed, neglected and/or refused to pay for the Unpaid Invoices.

7. On September 17, 2015, as a result of Urbancorp's failure to pay the Unpaid Invoices, ALPA caused to be registered two Claims for Lien as follows:

PROJECT

AMOUNT

INSTRUMENT NO.

Edgewood

$33,083.39

AT4011572

Curzon

$179,860.26

AT4011571

Attached hereto and marked as Exhibit "A" and Exhibit "B" respectively are true copies of the Claim for Lien for Edgewood, bearing instrument number AT4011572 and the Claim for Lien for Curzon, bearing instrument number AT4011571 both dated September 17, 2015.

8. Thereafter, on or about October 7, 2015, ALPA commenced two Actions, in Toronto, perfecting the Claims for Lien:

PROJECT

COURT FILE NO

DEFENDANTS

Edgewood

CV-15-537936

Urbancorp, Canadian Imperial Bank of Canada, and Terra Firma Capital Corporation

Curzon

CV-15-537937

Urbancorp, Travelers Guarantee Company of Canada, Canadian Imperial Bank of Canada, and Terra Firma Capital Corporation

Attached hereto and marked as Exhibit "C" and Exhibit "D" respectively are true copies of the Statement of Claim in Edgewood, commenced October 7, 2015 bearing Court File No. CV-15-537936, and the Statement of Claim in Curzon, commenced on October 7, 2015, bearing Court File No. CV-15-537937.

9. On or about February 26, 2016, ALPA commenced a Breach of Trust Action against Urbancorp and Saskin, in Toronto, bearing Court File No. CV-16-547487. Attached and marked as Exhibit "E" is a copy of the Statement of Claim, bearing Court File No. CV-16-547487.

Urbancorp's and Saskin's Insolvency Proceedings:

10. On or about April 29, 2016, Saskin entered into insolvency proceedings by filing a Notice of Intention to make a Proposal under the Bankruptcy and Insolvency Act ("BIA"); the proposal was rejected. The Fuller Landau Group Inc. is the Trustee for Saskin's Estate ("Trustee").

11. I am an inspector in Saskin's Estate.

12. On or about May 31, 2016, the Ontario Superior Court of Justice granted an Order appointing Alvarez & Marsal Canada Inc. as receiver and manager of Urbancorp and its related corporations under section 243 of the B/A, section 101 of the Courts of Justice Act and section 68 of the Construction Lien Act (the "Order"). Attached and marked as Exhibit "F" is a copy of the Order, dated May 31, 2016.

13. ALPA submitted a Proof of Claim for both Projects. Attached and marked as Exhibit "G" is a copy of the Proof of Claim submitted, dated November 14, 2016.

14. On or about May 6, 2019, Saskin prepared an Amended Statement of Affairs but did not include a residential property in same. Attached and marked as Exhibit "H" is a copy of the Amended Statement of Affairs, dated May 6, 2019.

15. On or about May 13, 2019, the Trustee provided a report with a number of documents regarding Saskin's Estate and Commentary of the Amended Statement of Affairs. Attached and marked as Exhibit "I" is a copy of the Trustee Report dated May 13, 2019.

The Examination of Saskin:

16. On or about June 11, 2019, Saskin was examined under section 163 (the "Examination"). I have been advised by Jeremy Sacks, counsel for a creditor, that there were several exhibits to that Examination which revealed that Saskin had declared a fifty percent interest in the various matrimonial homes owned by Saskin and his wife, Doreen Saskin ("Doreen") since 2011.

17. In particular, in 2011, Doreen owned a home located at 21 Boswell. Saskin claimed a 50% interest in this home in his Statement of Apparent Net Worth as of December 31, 2012. Attached and marked as Exhibit "J" is a copy of the Exhibit 6 to the Examination, being the Statement of Apparent Net Worth as of December 31, 2012.

18. Exhibit 7 to the Examination is the Statement of Apparent Net Worth for Saskin and Urbancorp as of December 31, 2013, again Saskin claimed a 50% interest in the properties located at 21 Boswell 155 Cumberland (which as indicated below was purchased in 2012). Attached and marked as Exhibit "K" is a copy of Exhibit 7 to the Examination, being the Statement of Apparent Net Worth as of December 31, 2013.

19. Exhibit 8 to the Examination is a Statement of Apparent Net Worth for Saskin and Urbancorp as of December 31, 2014. In this Statement, Saskin claimed an interest in the Cumberland Property. Attached and marked as Exhibit "L" is a copy of Exhibit 8 to the Examination, being the Statement of Apparent Net Worth as of December 31, 2014.

The Examination of Saskin's Accountant and Saskin's Commingling of Funds:

20. On or about November 29, 2019, the Executive Vice President of MNP, accountants for Urbancorp and Saskin, Mr. Jeremy Cole ("Cole"), was examined under section 165 of the BIA. Mr. Cole has worked with Mr. Saskin, his companies and his family trusts for approximately 20 years. Attached hereto and marked as Exhibit "M" are the transcripts from the Examination of Cole, dated November 29, 2019 (the "Transcripts").

21. In his evidence, Mr. Cole revealed that all entries reflecting Saskin's salary were made at Corporate year end. The entries reflected payments made to Saskin and Doreen earlier in the year. These entries would be prepared in consultation with Saskin:

q. So when cash would come in to UMI and Mr. Saskin would want to use it for personal purposes, ultimately it would be reflected in one of two places, either as a management fee after the fact as part of an annual, call it, invoice for management fees or alternatively it would be charged to his shareholder's account?

a. In his or Doreen's. (see Transcripts, page 24, Q95)

22. Doreen received a management salary even though she is a social worker, and she did not work for Urbancorp:

q. I take it, Mr. Cole, that Doreen Saskin never actively worked for the Urbancorp companies?

a. No, not that I'm aware of. (Transcripts, page 32, Q117)

23. The evidence also shows that it was Cole's role to provide unaudited financial statements for Urbancorp (Transcripts, pages 7- 8, Q21)

24. On November 1, 2012, Doreen purchased a residential property located at Suite 1202, 155 Cumberland Avenue, Toronto, Ontario (the "Cumberland Property"). Attached and marked as Exhibit "N" to this my Affidavit is a true copy of the Transfer, registered as AT3167311 on November 1, 2012.

25. Based on the documents produced before the Examination and reviewed at the Examination, I believe that Urbancorp paid for all or some part of the Cumberland Property in 2012, even though the Cumberland Property is only registered to Doreen:

q. Okay. So rather than guessing, would you agree with me that to the extend these transactions are reflected on the shareholder loan account of Mr. Saskin, that would reflect the fact that these are transactions UMI paid for the benefit of Mr. Saskin? That's why they're on the Alan Saskin share ---

a. What was the first - how did you start that sentence? Am I - you said ---

q. Right. Would you agree with me?

a. Yeah, I would agree with you.

q. Okay. And further down the page you'll see "10.31.2012 INV:155 Cumberland." 155 Cumberland is the condo that Alan and Doreen lived in until recently, correct?

a. Correct. (Transcripts, pages 59-60)

26. There has been discussion among the inspectors of Saskin's Estates that there is an Urbancorp worker who completed construction work at the Cumberland Property. Attached and marked as Exhibit "O" is a copy of the Minutes of the First Meeting of the Inspectors dated August 20, 2019.

The Cumberland Property and the Hazelton Property:

27. On or about October 11, 2019, Doreen sold the Cumberland Property to Andrew O'Born. Attached and marked as Exhibit "P" is a copy of the Instrument AT5261135 dated October 11, 2019.

28. On or about October 11, 2019, Doreen purchased a new home located at Suite 4A, 36 Hazelton Avenue, Toronto, Ontario (the "Hazelton Property"). Attached and marked as Exhibit "Q" is the parcel register for the Hazelton Property, dated November 9, 2020.

29. The Cumberland Property was sold for approximately $10,000,000 and the Hazelton Property was purchased for $5,000,000. Attached and marked as Exhibit "R" is a copy of the Minutes of the Third Meeting of the inspectors dated March 20, 2020, which confirms this information.

30. On or about November 5, 2020, Doreen undertook to not transfer, charge or otherwise encumber the Hazelton Property until December 31, 2020, without the prior written consent of the Trustee. Attached and marked as Exhibit "S" is a copy of the Undertaking, dated November 5, 2020.

31. I have also been advised by Jeremy Sacks, counsel for another Creditor of Estate, and inspector of the Estate, that there are additional transfers at under value that occurred in the relevant five-year period:

a. A $1.5 million transfer to Doreen on September 29, 2011;

b. Approximately $750,000 transferred to Doreen in the form of payments for improvements to the matrimonial home registered in her name;

c. transfers to Doreen to pay Doreen's credit cards;

d. various transfers to Saskin's son, Evan Saskin, or for his benefit, in the total amount of $509,262.39;

e. various transfers to Saskin's daughter, Jyll Saskin, or for her benefit, in the total amount of $37, 174.14;

f $23,720.40 transferred to Jyll Saskin's husband, Phillip Gales, on December 12, 2014;

g. various transfers to Saskin's son, Andrew Saskin, or for his benefit, in the total amount of $81,952.61; and

h. $150,000 transferred to Landmark Building Corp on March 6, 2014 for no consideration, which company is non-arm's length with Saskin.

32 As inspector of the estate and as referenced in the Minutes of the First Meeting of the Inspectors (Exhibit "O"), Saskin had an extensive wine collection that was auctioned by Waddington's Auctioneers & Appraisals. The auction yielded proceeds in the amount of $40,000.00 ("Auction Proceeds").

33. Based on the evidence, I do verily believe that the accounts of Saskin, Doreen and Urbancorp are so intermingled and commingled that further productions and a hearing regarding the ownership of the residential home, owned by Doreen and the Auction Proceeds, should be investigated. It is also necessary to investigate the various transfers at undervalue.

The Trustee's Consent:

34. I believe a section 38 motion is necessary as it will benefit the Estate.

35. In an email dated November 23, 2020, ALPA's counsel requested that the Trustee consent to the within section 38 motion. Attached hereto and marked as Exhibit "T" to this my Affidavit is a true copy of the email dated November 23, 2020 from Emilio.”

[20] In the Alpa Notice of Motion Alpa states:

“(d) The Creditor, Alpa obtained two judgments against these corporations.”

These “judgments” are not in the evidence before me. It is unclear from the Alpa materials which of the three actions attached as exhibits to the Hanson S.38 Affidavit, including the Alpa Saskin Claim, this statement relates to, and what findings of fact were made when those judgments were allegedly obtained, and against which “corporations”. None of Hanson’s affidavits filed on this motion identify the “judgments” or appear to attach them.

[21] In the Alpa Notice of Motion Alpa states:

“(j) Saskin does not have sufficient assets in Ontario to satisfy a costs award made in Alpa's favour on the S. 135 motion.”

But Alpa does not state in the Notice of Motion specifically which of the statutory grounds under R.56 that Alpa is citing on this Motion. In its Factum, Alpa states:

“5. The Bankrupt's Expunge Motion has no merit for the following reasons:

a. There is no indication that the Bankrupt satisfied the requirements of section 135(5) in that it does not appear that he asked the Trustee to reconsider its position on Alpa's claim.

b. The Bankrupt accepted Alpa's claim in his Amended Statement of Affairs, dated May 6, 2019, as there is no reference to a dispute of Alpa's claim on the Statement of Affairs.

c. The Expunge Motion was not brought within a reasonable time from the time it was allowed or even included in the Amended Statement of Affairs and the Bankrupt is barred from bringing the Expunge Motion.

d. Further, the Bankrupt is not permitted to challenge a proof of claim when there are no assets in the Estate.

e. The only reason the Bankrupt is now seeking to bring this Expunge Motion is because the Bankrupt seeks to collaterally attack the Section 38 order which also not permitted.

f. Finally, Alpa has provided sufficient evidence to support its claim of breach of trust as against Saskin.

6. Accordingly, Alpa seeks an Order for security for costs given that

(a) there are no assets in the Estate,

(b) there is no merit to the Bankrupt's motion and

(c) there is sufficient evidence to support Alpa's claim for breach of trust.”

[22] Hanson was cross-examined on her affidavit on January 19, 2022 (the “Hanson Cross- Examination”). I will deal with the specific evidence arising from the cross-examination in the Transcript filed by the Bankrupt (the “Hanson Transcript”). The sole exhibit #1 to the Hanson Cross-Examination is the Claims Register for the Bankruptcy of the Bankrupt prepared by the Trustee.

Bankrupt’s Evidence on Motion

[23] The Bankrupt relied on the Saskin Expungement Affidavit quoted above and added a supplementary affidavit sworn November 9, 2021 to correct adding the wrong exhibit B to the Saskin Expungement Affidavit, namely the Alpa Saskin Claim (the “Saskin Supplementary Affidavit”). The Bankrupt did not add a specific responding affidavit on this Motion. It does not appear that Saskin was cross-examined on the Saskin Expungement Affidavit.

III) LAW AND ARGUMENT

A. Legislation and Jurisdiction:

[24] The BIA and the Bankruptcy and Insolvency General Rules (the “BIA Rules”) do not have specific provisions relating to the ordering of security for costs relating to a Motion under the BIA, as opposed to a Bankruptcy Application, which has a specific security for costs provision under s.43(12) of the BIA.

[25] The BIA Rules state:

“R.3 In cases not provided for in the Act or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that that procedure is not inconsistent with the Act or these Rules.”

[26] As stated by the Court of Appeal in Re Di Paola (2006) 37117, relating to security for costs on an appeal arising out of the BIA:

“[6] As the motion was brought in the bankruptcy proceedings, this appeal is governed by s. 193 of the BIA. Neither the BIA nor the relevant bankruptcy rules address the question of security for costs on appeal. Consequently, the Rules of Civil Procedure apply: BIA, s. 183(2) (Bankruptcy and Insolvency General Rules, C.R.C., c. 368, s. 3).”

[27] Alpa cites Re Di Adamo 2014 ONSC 820 in the context of Trustee moving to obtain an Order for security for costs where a Creditor appealed from the disallowance of a Proof of Claim. Registrar Short held that:

“The whole case is authority to show that there is jurisdiction in the Court to order security for costs but that the exercise of that jurisdiction is discretionary, and ought not to be exercised automatically. This is also apparent from the judgment of Kay, L.J., at p. 24:

The true result is that security ought not to be ordered to be given except in cases of a peculiar nature. It is not a matter of course that, merely because the person who is appealing against the rejection of his proof, is a foreigner resident abroad, he should be ordered to give security. That would be a very harsh rule to lay down. In the great majority of instances the claim can be very easily and promptly decided without involving any great expense to the estate.”

[28] The Bankrupt cites the Court of Appeal in Murphy v. Sally Creek Environs Corporation, 2010 ONCA 312, to the same effect relating to Jurisdiction:

“[149] We agree with the respondents that, in exercising this discretion, registrars and courts have often been guided by the Rules of Civil Procedure, the Courts of Justice Act and the case law flowing from them. Rule 3 of the General Rules states: “In cases not provided for in the Act or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that that procedure is not inconsistent with the Act or these Rules.” Provincial rules of procedure thus perform a gap filling function in the interpretation and application of the General Rules. With respect to costs, reference to the Rules of Civil Procedure has been made in determining whether an appellant should post security for costs of an appeal (Towers Marts & Properties Ltd. (Re), 1968 270 (ON SC), [1968] 1 O.R. 605 (S.C.)) and the effect of an offer to settle on a costs award (Baltman v. Coopers & Lybrand Ltd. (1997), 47 C.B.R. (3d) 121 (Ont. Ct. J. (Gen. Div.)).”

Tests under Rule 56.01 of the Rules of Civil Procedure

[29] Rule 56.01 of the Rules of Civil Procedure reads: 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. R.R.O. 1990, Reg. 194, r. 56.01 (1).

(2) Subrule (1) applies with necessary modifications to a party to a garnishment, interpleader or other issue who is an active claimant and would, if a plaintiff, be liable to give security for costs. R.R.O. 1990, Reg. 194, r. 56.01 (2).

B. Jurisprudence regarding Motion for Security for Costs:

[30] The Court has considered all materials and arguments raised by all parties on this Motion. Any failure by the court to refer to specific arguments and materials raised does not reflect that the Court has not considered those arguments. Where quotations are underlined in these reasons, that emphasis has been added by me.

General Tests for Ordering Security for Costs:

[31] Associate Justice McGraw in Baca v. Tatarinov, 2018 ONSC 1307 (affirmed Baca v. Tatarinov, 2018 ONSC 5567) (“Baca”) has provided a very useful summary of the applicable legal analysis in considering whether to order security for costs under the Ontario Rules of Civil Procedure:

“[39] As set out by Master Dash in Stojanovic v. Bulut, 2011 ONSC 874, Rule 56.01 does not create a prima facie right to security for costs but rather triggers an enquiry whereby the court, using its broad discretion, must take into account a number of factors to make such order as is just in the circumstances. These factors include the merits of the claim, the financial circumstances of the plaintiff and the possible effect of an order for security for costs preventing a bona fide claim from proceeding.

[40] The initial onus is on the defendants to show that the plaintiff falls within one of the four enumerated categories in Rule 56.01. If the defendant meets the initial onus, the plaintiff can rebut the onus and avoid security for costs by showing that they have sufficient assets in Ontario or a reciprocating jurisdiction to satisfy a costs order; the order is unjust or unnecessary; or the plaintiff should be permitted to proceed to trial despite its impecuniosity should it fail (see Travel Guild Inc. v. Smith, 2014 CarswellOnt 19157 (S.C.J.) at para.16; Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (ONSC) at para. 7 [“Coastline”]; Cobalt Engineering v. Genivar Inc., 2011 ONSC 4929 at para. 16).

[41] Master Glustein (as he then was) set out the applicable principles at paragraph 7 of Coastline:

“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 Rule56.01, 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);

(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.)).

[42] The defendant’s onus under Rule 56.01(d) is a light one to show that there is good reason to believe that the plaintiff has insufficient assets in Ontario to satisfy a costs award (Georgian Windpower Corp. v. Stelco Inc. [2012] O.J. No. 158 (ONSC) at para. 7).

[43] In General Products Inc. v. Actiwin Company Limited, 2015 ONSC 6923, Lemon J. set out the following relevant factors at paragraph 19 regarding the sufficiency of evidence put forward by a plaintiff attempting to demonstrate that it has sufficient assets in Ontario to satisfy a costs award:

i.) the court must critically consider the quality as well as the sufficiency of the assets presently held and whether they are bona fide assets of the company;

ii.) there must be demonstrated exigible assets. It is insufficient for the plaintiff to show that it is profitable since the focus of the rule is not on income, but rather on the nature and sufficiency of assets;

iii.) the court must consider the liabilities of the company as well as its assets and in particular whether the assets to which the defendant is expected to look are secured to another creditor;

iv.) the rule does not countenance extensive and speculative inquiries as to the further value and availability of the asset. A mere possibility that the assets may be removed at some future time is not, without more, grounds for security;

v.) the failure of a plaintiff to respond to a defendant’s enquiry as to the availability of assets may raise a doubt as to the existence of assets.

[44] The plaintiff’s financial disclosure requires “robust particularity” including: 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 (General Products at para. 19; Al Masri v. Baberakubona, 2010 ONSC 562 at para. 19).”

[32] The Court of Appeal also made statements on the general approach to be taken on motions for security for costs in Yaiguaje v. Chevron Corp., 2017 ONCA 827 (“Yaiguaje”):

“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.”

[33] From the statements in the Notice of Motion of Alpa, the Hanson Affidavit, the Alpa Factum and the Alpa Reply Factum (notwithstanding that Alpa does not actually cite which test it is pursuing) it appears that the only relevant test under R.56, relating to an individual, and that was argued by the parties before me, is R.56(1)(e):

“R.56(1)(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;”

[34] The Bankrupt is an undischarged Bankrupt, and the Trustee has also not been discharged. Any after-acquired “Property” currently divisible amongst creditors, and is not exempt, as defined under the BIA, is the property of the Trustee. No evidence was presented on this Motion to counter the presumption that the Bankrupt “…has insufficient assets in Ontario to pay the costs of the defendant or respondent” nor was the issue of the impecuniosity of the Bankrupt challenged. Accordingly for the purposes of the tests under R.56.01(1)(e), I find that the Bankrupt has insufficient assets in Ontario to pay the costs of Alpa.

[35] Accordingly, the initial onus on the Coastline test is on Alpa 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 and then "the onus is on the plaintiff [Bankrupt] to establish that an order for security would be unjust" on the test in Coastline.

[36] As I have now found that the Bankrupt, on the evidence before me on this Motion “…has insufficient assets in Ontario to pay the costs of the defendant or respondent”, Alpa must prove that in this case under the provisions of s.56(1)(e) that “…there is good reason to believe that the action or application is frivolous and vexatious”.

Preliminary Issue- Can Alpa challenge on this Security for Costs motion the merits of the Bankrupt’s motion to Expunge?

[37] In the Bankrupt’s Factum at paragraphs 26-27 the Bankrupt argues:

“27. Alpa’s factum makes a hodgepodge of arguments unmentioned in the Notice of Motion, all of them to the effect that its breach of trust claim has merit, or that the Bankrupt’s Motion has none. The law is clear that where a moving party files a factum arguing grounds not listed in its notice of motion, this Court will refuse to consider those arguments. In 2183164 Ontario Inc. v. Gillani, the Divisional Court held that a Master committed reversible legal error when he granted a motion based upon grounds not listed in the notice of motion because doing so is “fundamentally unfair and cannot stand based on the authorities”.

28. There is a second, independent, reason that Alpa cannot now argue the merits: it refused to allow its affiant to answer questions respecting those merits on the basis that they were irrelevant to this motion. Such gamesmanship is forbidden. In Daland Developments Ltd. v. 2075568 Ontario Inc., for example, the defendants filed affidavits speaking to the merits of their motion and their action, and then refused questions about those merits on the basis that they were irrelevant. Citing 70 years of jurisprudence, this Court held that “it is inappropriate and unfair for a party to file affidavits in proceedings such as this and to then assert that their sworn written testimony is not open to challenge”, and ordered the questions to be answered before the underlying motion could proceed. Here, the assertions about the merits came after the cross-examination, not before, but the basic offence against fairness (the refusal to allow those assertions to be challenged under oath) is the same.”

[38] With respect to 2183164 Ontario Inc. v. Gillani, 2013 ONSC 1456 (“Gillani”) cited by the Bankrupt, in that case Master Sandler made determinations not in the contemplation of either of the parties on the Motion before him, after the hearing had concluded and outside of the Materials filed, stating that the Master:

“…embarked on a lengthy analysis of the action itself and drew the conclusion that there were anticipated procedural problems that were only going to pile up costs in the proceeding without getting an expeditious resolution of the core issues.

[22] In entering into that analysis, the master wandered far beyond the parameters of the motion before him as it had been framed by the defendants. In my view, this was unfair to the plaintiff who had no notice that these issues would be raised and no opportunity to either prepare material in response or address the issues appropriately in oral argument. This is a matter that went to the fairness of the motion and undermines any decision rendered on those issues.”

That is the basis for the Divisional Court’s full statement at paragraph 27 of Gillani, containing the partial quote cited by the Bankrupt, that:

“[27] The fact that the actual relief granted by the master in this case was sought in the notice of motion does not resolve the lack of notice. It is the grounds for that relief that are important. It is also no answer that s. 47(1) of the CLA is mentioned in the notice of motion. That does nothing to put the plaintiffs on notice of what is actually being sought. In truth, this was not a basis relied upon by the defendants. It was raised for the first time by the master and became the grounds upon which he made his decision. That is fundamentally unfair and cannot stand based on the authorities I have just cited.”

[39] In the case before me the Bankrupt has had ample opportunity to deal with the actual test under R.56.01(1)(e) as well as the alleged “hodgepodge” of procedural issues in both the Bankrupt’s factum and in Oral argument, and Alpa has had an opportunity to respond.

[40] Despite the vagueness of the wording of the Alpa Notice of Motion, and the greater precision of the Alpa Factum and Reply Factum, the Bankrupt was aware of the case that was to be met, and the Bankrupt in fact has made submissions both in written and oral form on the issue of merit, and in fact has led the argument regarding the regarding the legal tests under R.56.01(e), that Alpa did not present in its materials. Accordingly I do not see that Gillani is applicable and does not stand for the proposition that the Bankrupt says it does, particularly in the situation where those arguments were dissected quite thoroughly in both written and oral form by counsel for the Bankrupt.

[41] The issue with respect to the issue of the alleged refusal to answer questions at the Hanson Cross-Examination relating to the issue of merit, is not in itself a bar to the Alpa Motion continuing. I note that unlike in the Daland Developments case cited by the Bankrupt, the Bankrupt chose not move to compel answers to the questions or move to strike the Hanson Affidavit, which was why the Court compelled answers in Daland Developments.

[42] But as noted above, the onus is initially on Alpa under R.56.01(e), which was the test that was argued before me, to prove and provide evidence that the position of the Bankrupt on the Expungement Motion has no merit.

[43] Not answering questions as to merit, when the test under R.59.01(1)(e) requires a review of merit, invites the taking of an adverse inference by the Court, and affects the weight accorded as to the evidence provided on this motion, and also factors into the general tests for determining the justness of ordering security for costs set out above, particularly of the Court of Appeal in Yaiguaje, but does not completely bar Alpa bringing the Security for Costs Motion.

General Test under R.56- Consideration of Merits of Dispute:

[44] Jurisprudence under R.56 cautions the court that this is not a summary judgment motion, dispositive of the actual legal issues to be determined on the actual Action, Application or Motion.

[45] As noted in the excerpt above from Master Glustein’s (as he then was) decision in Coastline:

“(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] N.S.J. No. 124 (C.A.) at para. 83);”

[46] Accordingly I will not be embarking on making determinations of merit for the purposes of the Expungement Motion, but for the purpose of determining whether Alpa has met the tests required under R.56(1)(e) on this Motion.

C. Test under R.56(1)(e) – “…good reason to believe that the action or application is frivolous and vexatious…”

[47] The Bankrupt cites in his Factum the case of 1066087 Ontario Inc. v. Church of the First Born Apostolic Inc., 2002 CarswellOnt 2648, [2002] O.J. No. 3239 at para. 6 for the proposition that the test under s.56(1)(e) is conjunctive and that all parts of the Rule need to be proven by the Moving Party. The complete quote from Master Dash in that case states:

“6 The conjunctive test under rule 56.01(1)(e) requires both good reason to believe the action is frivolous and vexatious and that the plaintiff has insufficient assets to pay costs. Since these defendants have failed to satisfy the first part of the test security will not be ordered under this rule. As indicated, however, security will be ordered under rule 56.01(1)(d).”

[48] In that case Master Dash states at paragraph 5:

“Although the plaintiff may have considerable difficulty in proving its action against the individual defendants I cannot say at this stage that there is good reason to believe that the action against Miller and Jones is frivolous and vexatious.”

[49] With respect to the determination of what is a “frivolous and vexatious” action for the purposes of the test, the Bankrupt cites the decision of Wilton-Siegel, J. in 7868073 Ontario Ltd. et al v. 1841978 Ontario Inc. et al, 2017 ONSC 92 (“7868073 Ontario”):

“[12] In respect of section 56.01(1)(e), the test for establishing that an action is “frivolous and vexatious” entails a high standard. It has been suggested that the standard is expressed as demonstration that the action is one which “on its face, is so unreal that no reasonable or sensible person could bring it” (876502 Ontario Inc. v. I.F. Propco Holdings (Ontario) 10 Ltd. (1997), 1997 12196 (ON SC), 37 O.R. (3d) 70 (Ont. S.C.)) or more simply that the action is “devoid of merit”.”

[50] Another succinct statement as to the nature of the test required to be met by Alpa on this motion to establish that it “appears” that the s.56(1)(e) factor exists, was articulated by Spence, J. in 484130 Ontario Ltd. v. Konstantinou 2001 CarswellOnt 89, [2001] O.J. No. 111, 102 A.C.W.S. (3d) 519 (“Konstantinou”):

“8 The test set out in Rule 56.1(e) as to “good reason” must be understood in terms of the meaning generally accorded to frivolous and vexatious. On this basis, the test means “good reason to believe the claim has virtually no chance of succeeding”.”

[51] In neither their Factum or Reply Factum does Alpa provide specific submissions on the tests under R.56 or the legal test for the determination of what is “Frivolous and Vexatious” for the purposes of R.56(1)(e). As noted above, the Notice of Motion served by Alpa does not specifically state what factors under R.56 Alpa was proceeding under.

D. Nature of Claim by Alpa in Proof of Claim:

[52] Going back to basics, in the Alpa Proof of Claim, which the Bankrupt is seeking to reduce or expunge, as stated in the Hanson Proof of Claim Affidavit:

“3. Alan Saskin is an office and director ("Alan") of Urbancorp (The Beachi) Developments Inc. and Urbancorp (Leslieville) Developments Inc. (collectively "Urbancorp Companies").

Edgewood Avenue Project

4. Alpa supplied and installed railings and stairs and provided services and materials with respect to the property municipally known as 42 Edgewood Avenue in Toronto ("Edgewood Avenue Project").

5. Alpa rendered invoices in the amount of $33,083.39 to the Urbancorp Companies with respect to the Edgewood Avenue Project which remain outstanding.

Curzon Street Project

6. Alpa supplied and installed railings and stairs and provided services and materials with respect to the property municipally known as 50 Curzon Street, Toronto ("Curzon Street Project").

7. Alpa rendered invoices in the amount of $179,860.26 to the Urbancorp Companies with respect to the Curzon Street Project which remain outstanding.

and as a result:

9. Alan is an officer and director of the Urbancorp Companies is thus personally liable under section 13 of the Construction Lien Act for any breach of trust with respect to the funds received for the Projects.

[53] The Bankrupt in the Saskin Expungement Affidavit denies this liability, stating:

“4. As may be seen from the statement of claim, the allegations against me are contained in paragraphs 10 and 11:

10. Alpa states that the revenue and payments received by Urbancorp and the Defendants in relation to the Projects that used Alpa's materials are impressed with a trust in favour of Alpa. Full particulars of those trust payments and the Projects are within the knowledge of the Defendants.

11. Saskin is an officer, director or person with effective control of the affairs of Urbancorp, and was a fiduciary of Alpa with respect to funds received by him. He assented to, or acquiesced in, conduct that he knew or reasonably ought to have known amounted to a breach of trust and are personally, jointly and severally, liable to Alpa for such breaches pursuant to section 13 of the Construction Lien Act."

12. Contrary to what is pleaded in paragraph 11, I did not receive any funds in relation to the Projects that used Alpa's materials. Nor did I assent to, or acquiesce in, any conduct that amounted to a breach of trust. I am not aware of any breach of trust in relation to these Projects.

13. On or about May 16, 2016, the Projects went into receivership at the request and upon the application of the Canadian Imperial Bank of Commerce because of cost overruns. The Projects were only partially built at the time.

14. Following its appointment, the receiver, Alvarez and Marsal, completed the Projects over the following four years. All revenues received by the receiver and disbursed by it were done with court approval. Included in such disbursements were payments by the receiver to Alpa of $94,152.23.

15. I am not aware of any revenue or payments that were used for any purpose other than proper payments made in respect of the Projects.”

[54] Much time was spent at the hearing, and in the Court Materials, regarding the possible implications of the Bankrupt succeeding on the Expungement Motion to reduce or expunge the Alpa Proof of Claim, and the motivations of the Bankrupt doing so now, almost 6 years after the filing of the Proof of Claim.

[55] However, at its most basic, on the motion for security for costs before me, with respect to the Bankrupt’s Expungement Motion, the initial onus on the Coastline test is on Alpa 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, and in particular under R.56.01(e) that there is “…good reason to believe that” the Expungement Motion “is frivolous and vexatious”, meaning “that on its face, is so unreal that no reasonable or sensible person could bring it, or more simply that the Expungement Motion is “devoid of merit”, on the 7868073 Ontario test or that there is “good reason to believe the claim has virtually no chance of succeeding” on the Konstantinou test.

[56] Alpa is claiming that the Bankrupt, as a result of being an Officer and Director of Urbancorp (The Beach) Developments Inc. and Urbancorp (Leslieville) Developments Inc. (collectively the "Urbancorp Companies"), is liable under s.13 of the Construction Act, and the Bankrupt denies that allegation.

[57] That is the basis of the Alpa Proof of Claim as stated in the Hanson Proof of Claim Affidavit, and Alpa must prove that the Bankrupt’s defence of that allegation, as the basis for the Bankrupt seeking to reduce or expunge the Alpa Proof of Claim in the Expungement Motion is “frivolous and vexatious”, on the tests above as being “devoid of merit”, or proving that there is “good reason to believe the claim has virtually no chance of succeeding”.

[58] In the Alpa Reply Factum the following is stated with respect to the claim against the Bankrupt under s.13 under the Construction Act:

“6. Alpa has provided evidence of the breach of trust. The trust provisions under the Construction Act require that Alpa demonstrate (1) that the owner received funds, (2) that it supplied materials or services and (3) that it remains unpaid. The onus then shifts to Urbancorp, namely, Mr. Saskin to prove that it complied with its trust obligations under the Act. This is confirmed in the Ontario Court of Appeal in Colautti Construction Ltd. v Ashcroft Developments Inc. as outlined below:

81 In order to establish a breach of trust under s. 7 of the Act, the Contractor was required to demonstrate that the Developers had received funds that were to be used in the financing of the Projects (s. 7(1)), that the Contractor had supplied materials or services related to the improvement of the Projects (ss. 7(2) to (4)), and that the Contractor remained unpaid for at least some of those materials or services (s. 7(4)). On proof of these prerequisites, it fell to the Developers to demonstrate that they had complied with their trust obligations under the Act.

Colautti Construction Ltd. v. Ashcroft Development Inc ., 2011 ONCA 359, 2011 CarswellOnt 2993, 1 C.L.R. (4th) 138, 201 A.C.W.S. (3d) 624, 281 O.A.C. 201,

[Colautti] para 81

7. The corporations to which Alpa provided its services, being Urbancorp (Leslieville) Developments Inc. and Urbancorp (Beach) Developments Inc. were placed in receivership by CIBC. At the time of the receivership, Alpa had not been paid. Therefore, Alpa has satisfied the requirements as outlined in Colautti. The onus is then on the Bankrupt to account for the funds. The Bankrupt has not done so. Further, although Mr. Saskin swore in his Affidavit that he did not participate in a breach of trust, the emails attached to the Gissen Affidavit demonstrate his complete involvement in commingling and diverting funds, even to the extent that he used his personal email to cover his steps.

ZH Transcript, page 38, Q 126”

[59] The Alpa Reply Factum is responding to the following submissions made by the Bankrupt in the Bankrupt’s Factum. The Bankrupt did not file a sur-reply factum to the Alpa Reply Factum, but made Oral submissions regarding these arguments, which counsel for Alpa was provided opportunity to respond to before me:

“24. Alpa cannot establish that the Bankrupt's Motion is devoid of merit, because, inter alia, on Hanson's own testimony, the Court hearing that Motion will be obliged to reduce Alpa's Proof of Claim by a minimum of $94,152.23, (again, the 2018 Payments), a sum representing about 38.5% of the Claimed Indebtedness.

25. Further, that Court may in fact expunge Alpa's proof of claim in its entirety. Contrary to a statement made by Hanson in the affidavit attached to the Proof of Claim, s. 13 of the CLA stipulates that an officer or director (such as the bankrupt) will be personally liable thereunder only if such person "assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation"; Saskin has deposed that he has done no such thing. He has also denied receiving any funds derived from construction projects that used Alpa's materials. His evidence has not been challenged by cross-examination or by any evidence other than Hanson's say-so (about which she refused to be cross-examined).”

E. Evidence in support of Alpa Proof of Claim and for this Motion.

[60] The Bankrupt is referring to Hanson’s testimony in the Hanson Examination, which the Bankrupt summarized as follows in the Facts portion of the Bankrupt’s Factum;

“16. During cross-examination, Alpa's affiant (Hanson) testified that she was not prepared for questions about Alpa's breach of trust claim:

"I didn't think that we were going to be going into the merits of the breach of trust, our breach of trust claim at this point". Alpa's counsel took the position that the merits of its claim were irrelevant to its motion.

Q. How did Mr. Saskin assist Urbancorp to breach its . .. construction trust?

A. [He was the principal of Urbancorp.

Q. It is one thing to be a principal. It is another thing to assist a company to breach a trust. So I am asking you how specifically did Mr. Saskin assist Urbancorp to breach its construction trust?

MS. FRINO: Counsel, ... I think this line of questioning or where it is going is ... is too far for the parameters of the motion for security for costs ...

MS. FRINO: You know, counsel, I think we are going down the wrong path here. There ... there is a motion for security for costs, and we are going into the minutia of the breach of trust. I don't believe that this is somewhere where we need to go at this stage ... So I think we are delving too much into the minutia, and I think that goes outside of the requirements for this motion for security for costs. I am going to allow just this clarification, but I will not likely allow any further questions that delve this deeply into the issue of the breach of trust ...

17. Alpa thereafter refused to answer questions about its breach of trust claim against Saskin. Hanson did, however, confess that her affidavit of November 30, 2020 (filed in support of Alpa's motion for the Section 38 Order) had been false on the day it was sworn insofar as she had deposed that Alpa's invoices were then outstanding in a total principal amount of $212,943.65, which is to say without a deduction having been made for the 2018 Payments. When Hanson was asked why she had never corrected this false statement, she explained that "we were going to provide further details by way of supplementary affidavit, I believe". Yet when Hanson swore her December 22, 2021 affidavit in support of this motion, she adopted as true the 2020 affidavit which she knew contained a false statement about a material fact, being the amount allegedly owed.

18. Nine days after refusing questions on the merits of its breach of trust claim, Alpa filed a factum in which it argued that its breach of trust claim is meritorious and that the Bankrupt's Motion lacks merit.”

[61] Apart from the unfairness issues raised by the Bankrupt previously, and in the passage above, a more basic issue arose from the Hanson Cross-Examination as set out in the Hanson Transcript. I note the following passages from the Hanson Transcript:

17 Q. Mr. Saskin did not order any goods from Alpa with respect to Edgewood and Curzon, correct? MS. FRINO: Counsel, do you mean personally?

MR. TAYAR: Personally.

THE WITNESS: No. The companies did.

39 Q. Does Alpa have any evidence that Mr. Saskin has misappropriated or converted trust funds?

A. The materials are voluminous. But based on materials produced in the CCAA proceedings as well as evidence that Mr. Gissin has put before the courts, other courts in related proceedings, I think it speaks for itself in terms of misappropriation of trust funds as it relates to the proceeds from our projects, from the projects that we supplied.

40 Q. What evidence are you referring to that shows that Mr. Saskin misappropriated or converted trust funds specifically? MS. FRINO: I think –

THE WITNESS: Well -- A MS. FRINO: I'm sorry, go ahead.

THE WITNESS: The projects from -- as I understand it, were for the most part built out, and agreements of purchase and sale were entered into. According to Mr. Gissin's affidavit, a significant -- the equity from the Leslieville and Beach projects were essentially sucked out of the projects to satisfy the requirements of the bond raise, and the funds from the bond raise were then used to pay off debt owed to CRA and Terra Firma on CCAA projects.

MR. TAYAR: 41 Q. Are you referring to the time period after the trustee -- excuse me, the receiver took over or before the time that the trustee took over?

A. I'm not certain. I'm not certain when that took place. I believe it was -- either way it was five years pri -- within five years prior to Urbancorp being put under receivership or our projects being put under receivership.

42 Q. I am a little bit unclear about that. If your answer is you don't know, that's fine. But I just want to understand. You talk about –

A. I don't know.

43 Q-- a series of events. I am asking you was it after the time or before the time that the receiver took over?

A. Before the time.

44 Q. You believe it was before the time the receiver took over?

A. I do.

45 Q. Do you know whether Mr. Saskin ever used monies held by any companies in the Urbancorp Group to fund his and Doreen's lifestyle?

MS. FRINO: Counsel, that is our argument.

MR. TAYAR: I am going to let the witness answer the question. It is a fair question. THE WITNESS: Yes.

MR. TAYAR:

46 Q. What evidence do you have to support that statement?

A. Various statements of net worth that were produced in inspectors meetings.

47 Q How do those documents show that Mr. Saskin used monies from the Urbancorp Group to fund his and Doreen's lifestyle?

A. I believe all of that is found in the transcript of Mr. Cole, Saskin's accountant. 48 Q. The transcripts? Is that what you said?

A. Correct. That is included in our November 2020 motion record.

49 Q. Is that the entire source of your opinion? Or do you base your opinion on anything else?

A. At this time, that is what I am basing it on.

50 Q. Do you know whether Mr. Saskin used monies held by any company in the Urbancorp Group to purchase any of Dor -- to purchase any of Doreen's former or current homes?

A. Based on the flow of funds, that's what appeared to be the case. 51 Q. What flow of funds are you 2 referring to?

A They used the funds from the projects to finance their personal lifestyle. 52 Q. Do you have evidence of that?

A. Again, that would be found in the transcripts of Mr. Cole.

53 You base your entire opinion or that statement on the transcripts of Mr. Cole, correct?

A. At this time, yes.

84 Q. Is there any written documentation that you are aware of showing that Mr. Saskin assented to or permitted a corporation to breach a trust?

A. I think based on all the documents in the various proceedings, there is lots of documentation to suggest that.

85 Q. What documents are you referring to specifically?

A. Again, materials produced by Mr. Gissin in his proceedings as well as materials produced in CCAA proceedings.

86 Q. What materials in the CCAA proceedings?

A. There is various ... the materials, like I said before, are voluminous. There is a number of reports that have been produced by the monitor and in terms of what has been produced by Mr. Cole in the -- his examination and what has been produced by Mr. Cole in his examination.

87 Q. I heard you refer to Mr. Cole's material. Are there any other documents specifically that you could think of?

A. Off the top of head, there is a variety of correspondence produced in Mr. Gissin's affidavit, and I can't recall off the top of my head which motion record or the date of the motion record. But it explains in detail the financial circumstances of Urbancorp and how they used project funds to rearrange or how they used project funds to finalize the bond raise and pay off debt owed on other projects.

88 Q. How did Mr. Saskin assist Urbancorp to breach its construct -- its construction trust?

A. He ... he was -- he was the principal of Urbancorp.

89 Q. It is one thing to be a principal. It is another thing to assist a company to breach a trust. So I am asking you how specifically did Mr. Saskin assist Urbancorp to breach its construction trust?

MS. FRINO: Counsel, I ... I understand the nature of your questions. I just 1 don't want to blur the lines here because there is -- this first motion is the motion for security for costs, and the second part of this motion will be the motion to expunge where Alpa will have its materials arguably to substantiate its position in terms of the breach of trust. So I ... I am giving leeway in terms of the motion for security for costs, but I think some of these questions -- and -- you know, and I don't want to get into territory where you are examining our client twice on the same issue. So I think this line of questioning or where it is going is ... is too far for the parameters of the motion for security for costs, which is really the four corners of our affidavit which we provided both in the November motion as well as this motion.

MR. TAYAR: I believe the question I am asking is proper for the security for costs motion. If you don't, you're welcome to refuse. But I want the refusal on the record. So I am going to ask again, and if you want to refuse, that's your choice.

MS. FRINO: I think – MR. TAYAR:

90 Q. How did Mr. Saskin assist Urbancorp to breach its construction trust?

MS. FRINO: The problem is it has already been answered because she has stated that just in terms of the issues with respect to the raising of the bond and –

MR. TAYAR: I want the witness to answer it. If you want to refuse, that's your choice. But I want the refusal on the record if you are going to do that.

91 Q. So, Ms. Hanson, please answer my question: How did Mr. Saskin assist Urbancorp to breach its construction trust?

A. He arranged it all himself.

92 Q. He arranged what all himself?

A. He, together with Terra Firma, arranged it all himself.

93 Q. You just repeated the same thing. You are going to have to give me –

A No.

94 Q. -- some more details. How did -- what did he arrange?

A. I just explained it to you, and I didn't think that we were going to be going into the merits of the breach of trust, our breach of trust claim at this point. But my -- from a rudimentary perspective or my rudimentary understanding of it all is that Mr. Saskin personally arranged ... personally arranged. .. you know, personally arranged the ... or ... or structured the financing or funds from the projects so that he could satisfy the requirements of the bond raise.

95 Q. What evidence do you have to support that statement? 1

A. It is in correspondence. It – 96 Q. Which correspondence?

A. It is in correspondence between Mr. Saskin and others I can't recall off the top of my head in Mr. Gissin's affidavit.

97 Q. Your source for that information again is Mr. Gissin's affidavit, correct?

A. That's correct.

152 Q. Earlier I took you to paragraph 5 of your affidavit of November 30th. You can open that up maybe just so we can be looking at the same thing. It is tab 3 of the motion record. I took you to paragraph 5 of that affidavit, if you could look at it again.

A. Right

153 Q. Earlier you said that the payment made by Alvarez & Marsal of approximately $94,000 wasn't reflected in that statement, correct?

A. That's correct.

154 Q. My question is why wasn't it reflected in that affidavit at paragraph 5? MS. FRINO: Counsel, it is just –

THE WITNESS: I am not – MS. FRINO: Sorry .

1MS. FRINO: I—

THE WITNESS: Battista, go ahead.

MS. FRINO: No, I think, counsel, it is just when -- that's -- that affidavit us sworn on her knowledge, information, and belief at that time and –

MR. TAYAR: Please don't assist the witness. Let her answer the question. She has knowledge. She swore the affidavit. Let her explain it, please.

155 Q Ms. Hanson, just answer my question. If you want to refuse, that's fine. But it is a very relevant question, so let's have an answer. Paragraph 5 says something. You are saying it doesn't reflect what it is supposed to reflect. Ms. Hanson, please explain why Alvarez & Marsal's payment is not reflected in that paragraph.

A. Because it isn't. From what -- we were going to provide further details by way of supplementary affidavit, I believe. But, in any event, the amounts owing to Alpa on Curzon and Edgewood are approximately 115K on Leslieville and 3,600 on The Beach.

[62] Section 13 of the Construction Act reads:

Liability for breach of trust By corporation

13 (1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust. R.S.O. 1990, c. C.30, s. 13 (1).

Effective control of corporation

(2) The question of whether a person has effective control of a corporation or its relevant activities is one of fact and in determining this the court may disregard the form of any transaction and the separate corporate existence of any participant. R.S.O. 1990, c. C.30, s. 13 (2).

Joint and several liability

(3) Where more than one person is found liable or has admitted liability for a particular breach of trust under this Part, those persons are jointly and severally liable. R.S.O. 1990, c. C.30, s. 13 (3).

Contribution

(4) A person who is found liable, or who has admitted liability, for a particular breach of a trust under this Part is entitled to recover contribution from any other person also liable for the breach in such amount as will result in equal contribution by all parties liable for the breach unless the court considers such apportionment would not be fair and, in that case, the court may direct such contribution or indemnity as the court considers appropriate in the circumstances. R.S.O. 1990, c. C.30, s. 13 (4).

[63] Again, I am constrained by the jurisprudence from ruling on the merits of the dispute, but I must deal with the basis of alleged liability of the Bankrupt under the Construction Act claimed in the Alpa Proof of Claim, for the purpose of making the determination under the R.56(1)(e). tests.

[64] As I noted to counsel at the hearing, s.13 of the Construction Act does not create an absolute liability offence for officers and directors of a corporation that deals with trust funds under that Act if an alleged breach of Trust by the Corporation is proven. A court must still determine that the officer or director assented to, or acquiesced in, conduct that the officer or director knows or reasonably ought to know amounts to breach of trust by the corporation in order to be found liable for the breach of trust.

[65] An example of the analysis of liability required under s.13 of the Construction Act, leading to a determination under s.178(1)(d) of the BIA, is found in the leading decision of the Court of Appeal in Delco Automation Inc. v. Carlo's Electric Limited, 2016 ONCA 591 . If s.13 of the Construction Act was an absolute liability offence, no such judicial analysis would be required.

[66] I noted to counsel that the Colautti Construction Ltd. v. Ashcroft Development Inc. quotation noted above from the Alpa Reply Factum deals with the liability of the Trustee company, the “Developers” from the quote cited, and not the officers and directors of the company.

[67] As I also noted to counsel, the test for determining a Breach of Trust under s.8 of the Construction Act is also not an absolute liability offence and the Court must make a determination of whether trust funds were received, and were misapplied by the Trustee company for purposes other than those permitted under the Construction Act, employing the detailed analysis set out by Milloy, J. in the leading case of St. Mary’s Cement Corp. v. Construc Ltd. (1997), 1997 12114 (ON SC), 32 O.R. (3d) 595 (Ont. Gen. Div.) used by the trial Judge in Colautti, and cited with approval by the Court of Appeal in Colautti.

[68] After the quote from Colautti used in the Alpa Reply Factum, the Court states the following regarding the depth of evidence being reviewed in Colautti by the trial judge to make the determination of whether the “Developers” breached their trust obligations in Colautti:

“[82] As set out above, the Developers received significant financing funds in relation to the Projects. Further, there is no dispute that the Contractor supplied services on the Projects. The only s. 7 prerequisite in issue, therefore, was whether the Contractor remained unpaid for any of those services. The trial judge held that there was “some amount of debt” owed to the Contractor “at all times relevant to the litigation”. For the reasons already given, I have concluded that this key finding was open to the trial judge on the evidence.

[83] In these circumstances, the Developers were obliged to demonstrate that they had met their s. 7 trust obligations. They failed to do so. The trial judge found that the Developers failed to produce a detailed accounting or banking records with respect to the bank accounts that they maintained for the Projects. The Developers also failed to maintain records of funds paid out of the Projects’ operating accounts, to contractors or others. Further, based on Mr. Jacobs’ evidence, the frailties of their accounting system precluded the Developers from identifying which of the Contractor’s invoices had been paid.

[84] In contrast, the trial judge found that there were a “great number” of invoices to the Developers shown as outstanding on the Contractor’s accounting system. Although the Developers complain of the sufficiency of the accounting documentation produced by the Contractor, the Contractor tendered copious volumes of invoices and supporting materials at trial. The Developers acknowledged at trial that the Contractor’s invoices on the Seven Contracts were tendered and received. The Developers made no contemporaneous written objection to the invoices. Moreover, on the accepted evidence of John Stokes, there were at least some approved purchase orders for the Contractor’s services that were not honoured.”

[85] On these facts, a finding that the Developers had breached their trust obligations to the Contractor was inevitable. As the trial judge aptly said, citing St. Mary’s Cement Corp., at p. 610, a trustee “who deposits trust funds into a general business bank account and intermingles them with other funds from other sources does so at [its] peril”. I agree.”

[69] In this case there is no evidence before me on this Motion that:

a) a judgment has been obtained by Alpa, or any other plaintiff against the Urbancorp Companies where the Court has found that there has been a breach of Trust under s.8 of the Construction Act by the Urbancorp Companies;

b) that Saskin as an officer and director of the Urbancorp Companies has been found liable under s.13(1) of the Construction Act;

c) that Alpa had obtained leave to lift any applicable stay of proceedings to pursue the Alpa Saskin Claim to determine the above issues, and/or to obtain a determination that the claim against the Bankrupt is a claim to which s.178 of the BIA applies;

[70] Accordingly, there is no evidence before me that there has been a judicial determination made to date that there has been a breach of Trust by the Urbancorp Companies under s.8 of the Construction Act, and no similar judicial determination that the Bankrupt is liable under s.13 of the Construction Act.

[71] Currently there is apparently no active judicial forum, other than the proof of claim process in the Saskin Bankruptcy, for determining that liability by the Urbancorp Companies and the Bankrupt for breach of trust under the Construction Act. A result I must review the evidence properly presented on this Motion.

[72] It is also not clear to me what findings, if any, Alvarez & Marsal, the Court Appointed Receiver of the Urbancorp Companies (the “Receiver”) has made and reported to the Court with respect to the allegations of breach of Trust made by the Urbancorp Companies made by Alpa, and the allegations made by Alpa against the Bankrupt under s.13 of the Construction Act.

[73] Counsel for Alpa stated in the Hanson Transcript at Q89 the evidence filed on this motion “… is really the four corners of our affidavit which we provided both in the November motion as well as this motion”. But my tedious recitation of the Hanson Transcript above indicates that that is not actually true.

[74] From the review of the Hanson Transcript, as I have highlighted above, it is apparent that for many of the issues that would be required to be proven by Alpa under s.8 and s.13 of the Construction Act to support a finding that the Urbancorp Companies had breached trust and the Bankrupt had “assented to, or acquiesced in” that breach and was therefore liable to Alpa, as alleged in the Alpa Proof of Claim and the Hanson Proof of Claim Affidavit, the evidence relied upon by Hanson is not in her direct knowledge, but rather Hanson is relying on evidence in:

1. the Gissin Affidavit;

2. the transcript of the examination of Jeremy Cole, (“Cole”) the accountant for the Bankrupt and his family companies, under the provisions of s.163 of the BIA held on November 29, 2019 (the “Cole s.163 Examination”) (at Exhibit “M” to the Hanson S.38 Affidavit);

3. information and belief statements in the Hanson S.38 Affidavit regarding the occurrences of alleged transfers at undervalue based on information provided by Jeremy Sacks, another inspector of the Bankruptcy Estate of the Bankrupt, and counsel for other creditors of the Bankrupt (“Sacks”), and in particular, Sacks advising Hanson of the testimony of the Bankrupt at a s.163 examination under the BIA, which transcript is not attached to the Hanson S.38 Affidavit (although some exhibits to that examination are).

[75] As I pointed out to counsel for Alpa at the hearing, pointing at an affidavit of another party, in another proceeding, and saying that your agree with their evidence, does not make that evidence admissible for the purpose of proving matters in issue in this Motion.

[76] The Gissin Affidavit is nowhere in evidence for this hearing - it was not included as an Exhibit to any of the Hanson affidavits, and was not made an exhibit to the Hanson Cross- Examination, but was uploaded to Caselines by Alpa at some point prior to the hearing. Counsel for the Bankrupt objected to its use on this Motion.

[77] I do not know the context of the filing of the Gissin Affidavit in the CCAA proceeding or the ultimate result of the Motion for which it was filed, or whether:

i) Gissin was cross-examined on the Gissin Affidavit,

ii) any of the facts as stated in that affidavit have changed since it was sworn in 2018,

iii) there was ever a judicial determination of the credibility of Gissin with respect to the evidence presented in the Gissin Affidavit,

iv) any of the facts cited in the Gissin Affidavit were determined by a Court.

There is no evidence before me that the Bankrupt, in particular, had an opportunity to test that evidence.

[78] The majority of the paragraphs of the Alpa Reply Factum refer to the Gissin Affidavit or other “voluminous materials” in the CCAA proceedings as support for the arguments presented by Alpa on this Motion.

[79] The Transcript of the Cole s.163 Examination is an exhibit to the Hanson s.38 Affidavit, but it is apparent from the Transcript that counsel for the Bankrupt was not present at that examination. Similarly, there is no evidence before me that the Bankrupt, in particular, had an opportunity to test that evidence either.

[80] I note that R.4.06(2) states:

“(2) an affidavit shall be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that that deponent could give if testifying as a witness in court except where these rules provide otherwise.”

[81] Rule 39.01(4) governs affidavit evidence on motions: “Contents - Motions

39.01(4) An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.”

[82] I note that in Glasjam Investments Ltd. v. Freedman, 2014 ONSC 3878, (now) RSJ Macleod summarized some of the problems that I am raising:

“32 The affidavit tendered in support of Ms. P's motion is illustrative of three problems which are unfortunately all too common. The first of these is misuse of "information and belief." Of course affidavits in Ontario may be based on information and belief. Rule 39.01 (4) says so. This rule permits efficiency in drafting of affidavits by making what might otherwise be hearsay admissible. It is also a useful provision for relief such as injunctions or freezing of assets when the very issue before the court is whether there is good reason to believe a state of affairs that cannot be proven.

33 Rule 39.01 (4) is not, however, a mechanism for magically transforming speculation into hard evidence. Information and belief may be admissible. It will not necessarily have probative value nor will it preclude a court from drawing a negative inference from the failure to put forward the best available direct evidence on a contentious issue. An uninformed or unqualified witness swearing that they believe a particular assertion made by someone else is evidence of little or no weight at all.”

[83] I also note the following statement of Beaudion, J. (as he is now) in Canadian Blood Services v. Freeman, 2004 35007 (ON SC).

“19 A number of paragraphs in the Lapierre affidavit appear to offend rule 39.01(4). That rule requires that an affidavit in support of a motion should be based on the deponent’s personal knowledge. Where the statements are not based on the deponent’s personal knowledge, the source of the information and the fact of the belief should be included. The rule is well known and, in the face of an objection being taken, the Court may not waive the irregularity.”

[84] I am constrained by the jurisprudence on a Security for Costs motion to be making evidentiary determinations of admissibility for the purposes of the Expungement Motion, but rather only with respect to the issues relating to the tests under R.56 on this Motion.

[85] What is plain however, that on many of the “very issues” that are needed to be proven by Alpa to support the Alpa Proof of Claim with respect to the Expungement Motion, and for this Motion, at present, a significant proportion of evidence supporting the Alpa Proof of Claim appears to be, at best, information and belief reliance by Hanson on the testimony or information of other persons, namely Gissin, Cole and Sacks, in other proceedings, which testimony the Bankrupt may not have been able to test for the purposes of the Expungement Motion or this Motion.

[86] The submissions by the Bankrupt relating to the Daland Developments case, cited in the Bankrupt’s Factum, are applicable to this issue as well.

[87] I appreciate that, as counsel for Alpa stated at the hearing, and as she stated in the Hanson Transcript:

“…this first motion is the motion for security for costs, and the second part of this motion will be the motion to expunge where Alpa will have its materials arguably to substantiate its position in terms of the breach of trust.”

from which I understand that Alpa is intending to file responding materials on the Expungement Motion, that will provide additional, better, evidence for its Trust claim against the Bankrupt.

[88] But that does not assist me on this Motion, where such better evidence is absent, from making the determination that, as argued by Alpa, the Expungement Motion by the Bankrupt is “frivolous and vexatious”, being “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”.

[89] On the evidentiary record before me, and particularly in the Hanson Cross Examination, the Bankrupt has successfully raised issues relating to the strength of the evidence in support of the Alpa Proof of Claim necessary to prove that Alpa has a claim against the Bankrupt under s.13 of the Construction Act, that provides evidence that the Expungement Motion is not “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”.

[90] Also, the circumstances of the presentation of this “evidence” for this Motion, also gives rise to consideration of whether the attempted use of this evidence on this Motion affects the justness of granting a security for costs order as part of the requirement in Yaiguaje for the Court to holistically examine all the circumstances of the case and to be guided by the overriding interests of justice to determine whether it is just that the order be made.

[91] As the Urbancorp Companies are in Receivership, where presumably the Receiver has custody of the records of those companies, and a Trustee has been appointed with respect to the Bankrupt who may also be in possession of necessary evidence, it is not clear to me whether either or both of Alpa and the Bankrupt have direct access to the documentation and evidence that each will require to permit them to discharge the respective onus’ imposed on them by s.8 and 13 of the Construction Act and s.135(5) of the BIA. These are not evidentiary issues for this Motion, but need to be considered by the parties on the Expungement Motion.

F. Reduction of Alpa claim by Payments made by Receiver:

[92] In the Bankrupt’s Factum the Bankrupt argues that Alpa cannot prove that the Bankrupt’s Expungement Motion is devoid of merit on the tests above as the Bankrupt has demonstrated that the Alpa claim is less than the amount claimed in the Alpa Proof of Claim, specifically:

“…on Hanson's own testimony, the Court hearing that Motion will be obliged to reduce Alpa's Proof of Claim by a minimum of $94, 152.23, (again, the 2018 Payments), a sum representing about 38.5% of the Claimed Indebtedness.”

[93] The Bankrupt is referring to the issues admitted to Hanson in the excerpts of the Hanson Transcript above:

153 Q. Earlier you said that the payment made by Alvarez & Marsal of approximately $94,000 wasn't reflected in that statement, correct?

A. That's correct.

155 Q Ms. Hanson, just answer my question. If you want to refuse, that's fine. But it is a very relevant question, so let's have an answer. Paragraph 5 says something. You are saying it doesn't reflect what it is supposed to reflect. Ms. Hanson, please explain why Alvarez & Marsal's payment is not reflected in that paragraph.

A. Because it isn't. From what -- we were going to provide further details by way of supplementary affidavit, I believe. But, in any event, the amounts owing to Alpa on Curzon and Edgewood are approximately 115K on Leslieville and 3,600 on The Beach.

[94] The “Affidavit” referred to is paragraph 5 of the Hanson S.38 Affidavit, which reads:

“5. ALPA issued various invoices to Urbancorp for the services and materials it provided which remain outstanding in the sum of $33,083.39 for Edgewood and $179,860.26 for Curzon (collectively the "Unpaid Invoices").”

[95] Given the holistic approach as set out in Yaiguaje required to be taken by the Court in determining whether to grant an order for security for costs, and the tests in the various cases cited including Coastline, regarding the factors required to be determined on a security for costs motion, the fact that:

1. the testimony of Hanson is not correct in the Hanson S.38 Affidavit on this issue,

2. was admitted in the Hanson Cross-Examination,

3. which also makes the Hanson Proof of Claim also now incorrect, having been sworn before the payment by the Receiver,

raises credibility issues that cannot be determined on this Motion, and is a factor that must be given due consideration using the holistic approach to granting of security for costs orders, and in the considering of whether the Expungement Motion is “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”, but does not automatically disentitle Alpa from the relief Alpa is seeking on this Motion.

G. Alleged Failure by the Bankrupt to request expungement by Trustee:

[96] Alpa argued, citing Re Lights Travel Service Ltd. (1985) 1985 614 (BC SC), 56 C.B.R. (N.S.) 175 (B.C.S.C.), that because the Bankrupt had not expressly first asked the Trustee to disallow or expunge Alpa’s claim that the Bankrupt is precluded from bringing the Expungement Motion and therefore the motion is “devoid of merit”.

[97] I do not agree. On Alpa’s own materials on this Motion, at Exhibit D to the Hanson Affidavit for this Motion is a letter dated August 16, 2021 from counsel for the Bankrupt to counsel for Alpa giving notice of the intention to bring this Motion, and attaching a request form for the scheduling of a Special Appointment for the Expungement Motion, requiring the consent of the Trustee. The Bankrupt served its motion in late August of 2021, including on the Trustee. There have been several case conferences before me after the service of those materials where counsel for the Trustee has been involved. There has been ample time for the Trustee to take a contrary position. The Trustee did not appear on this Motion.

[98] There is no evidence before me that the Trustee has indicated any intention to bring a Motion to expunge the Alpa Proof of Claim, which is what the Court in Re Lights Travel Service Ltd. required, as correctly pointed out by the Bankrupt. I note that the Trustee would need approval of the inspectors of the Bankruptcy Estate to do so.

[99] In addition, I find with respect to this issue any alleged procedural irregularity by the Bankrupt to take this extra step does not meet the test in s.187(9) of the BIA.

H. Alleged Delay by the Bankrupt in bringing the Expungement Motion:

[100] Alpa also argues that because the Bankrupt has not proceeded to expeditiously bring the Expungement Motion, that the Expungement Motion cannot succeed and is therefore “devoid of merit”.

[101] Firstly, the Bankrupt is correct that Alpa has provided no evidence on this Motion to show what prejudice has occurred to Alpa, of the traditional forms of evidence of procedural delay causing prejudice to litigants, in any of the affidavits filed by Hanson on this Motion.

[102] The Bankrupt was assigned into Bankruptcy in May, 2019. I note from the Hanson S.38 Affidavit that the Bankrupt and Cole were only examined under s.163 of the BIA in the summer and fall of 2019. The Trustee was only requested to consent to the bringing of the S.38 motion in November of 2020.

[103] According to the Hanson Affidavit on this Motion, the S.38 Order was granted on December 14, 2020. Creditors were served in January, 2021, and the claim was issued on May 7, 2021 by Alpa.

[104] Alpa cites Krespil v Nathalie Brault Syndic Inc. 2017 QCCA 523, 2017 2017 QCCA 523, CarswellQue 2498, 279 A.C.W.S. (3d) 246, 48 C.B.R. (6th) 1, para 35, regarding the reasonableness of time issue but Krespil itself cites Re Colonial Footwear, Ltd., Ex P. Sussman. 1943 365 (ON SC), [1943] 1 D.L.R. 799 which stated:

“The application under this section should be made in a reasonable time. The applicant applied promptly after he had paid off his liability to the bank. I cannot say that the time taken here was unreasonable under the circumstances particularly as the trustee is not prejudiced by the delay.”

making clear that evidence of prejudice was a factor in the Court in Re Colonial Footwear making that determination.

[105] Alpa also cites 151548 Canada Inc ., Re, 1998 CarswellQue 746, 82 A.C.W.S. (3d) 235, J.E. 98-1779, but that decision of the Quebec Court of Appeal deals with a motion to annul a bankruptcy and to annul the sale of assets approved after the first meeting of creditors, on the basis that no proper meeting of directors of the Bankrupt had been held to approve the assignment. The moving party attended the first meeting of creditors and allowed the asset sale to a third party to proceed. In addition to not dealing with s.135(5), the Court in that case decided that the moving party’s request to set aside the bankruptcy and sale of the Bankrupt’s assets to a third party 4 months after it had occurred, should not be granted. I find that case completely distinguishable on those facts.

[106] The Bankrupt cites Syndic de Isolation Techno-Pro inc., 2021 QCCA 672 which was a s.135(5) case and where the Court of Appeal for Quebec allowed a motion to expunge a proof of claim filed in 2007, that was brought in 2012, 13 months after undertakings were answered after an examination in the s.38 action commenced by that creditor, indicating that a portion of the proof of claim was incorrect. The Court of Appeal in making that determination took a holistic approach, stating:

“[19] Le juge a mal exercé son pouvoir discrétionnaire en omettant de considérer les objectifs fondamentaux de la LFI, c’est-à-dire la protection des intérêts du failli et des créanciers ainsi que le principe sous-jacent à ces objectifs, l’exigence d’honnêteté, au moment de rejeter la requête au motif qu’elle était tardive, créant ainsi un résultat qui est injuste dans les circonstances.”

[107] Alpa is not precluded from making arguments at the Expungement Motion regarding delay by the Bankrupt in bringing the Expungement Motion, if proper evidence is provided of prejudice to Alpa.

[108] But I cannot determine on the evidence before me on this Motion that such prejudice has occurred, and after taking into consideration Syndic de Isolation Techno-Pro Inc., I cannot determine that the alleged delay precludes the Bankrupt from bringing the Expungement Motion on this ground, because it is “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”, for the purposes of determining whether a security for costs Order should be granted.

I. Bankrupt cannot bring the Expungement Motion because there are no assets in the Bankruptcy estate:

[109] Alpa made this submission, citing [Re Giambattista (2009) 2912 (ON SC)], but as I noted, in that case there was no s.38 proceeding, but a pending fraudulent conveyance action, involving as summary administration bankruptcy estate with no assets. Chief Justice Morawetz (as he is now) stated:

“[31] However, from the standpoint of the creditors, there is no benefit to the Estate in having this issue determined until such time as there are realizations in the Estate or in the Fraudulent Conveyance Action. The reason is straight forward. If there are no assets to distribute, the quantum of the claims filed against the Estate is, for distribution purposes, irrelevant. If the situation changes, and there are realizations in the estate or if proceeds are realized in the Fraudulent Conveyance Action, it could be that this issue becomes relevant. However, at this point, it is not relevant and, it seems to me that the Estate should not be burdened with any additional administrative costs in addressing this issue until it is, for distribution purposes, a relevant issue.

[33] In my view, the appropriate disposition with respect to this issue is to stay the proceedings initiated by Ms. Giambattista to expunge the Proof the Claim pending further order of the court. This matter can be revisited in the event that there are assets available for distribution to creditors in the Estate or to the participating creditors in the Fraudulent Conveyance Action. It could also be revisited in the event that Ms. Giambattista or some third party indicates that they are prepared to fully cover the expenses of the Trustee and Movado and their counsel for all costs associated with the application to expunge the Proof of Claim.

[34] If Ms. Giambattista wishes to proceed with the application to expunge the Proof of Claim, the parties are directed to scheduled a 9:30 a.m. appointment with me in order to obtain further directions with respect to this issue.

[35] With respect to the merits of the application to expunge the Proof of Claim, I decline to make any comment at this time.”

[110] As I pointed to counsel for Alpa, this decision does not stand for the proposition that the Bankrupt cannot bring a s.135(5) motion if there are no assets in the estate, but stands for the proposition that the allowing of the bringing of the motion is within the discretion of the Court.

[111] Accordingly, I do not see how this argument by Alpa can be successful in proving for the purposes of this Motion that the Expungement Motion is “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”, for the purposes of determining whether a security for costs Order should be granted.

[112] Alpa also raised the argument that the Expungement Motion was devoid of merit because the Bankrupt in the amended statement of affairs in the Bankruptcy “accepted” the indebtedness claimed owing under the Alpa Proof of Claim. However the amounts declared by the Bankrupt on the statement of affairs are not determinative of the claims filed, and the Trustee has imposed upon it the duty under the BIA to review, admit or disallow proofs of claim filed in the estate, not the Bankrupt. So this too was not a successful argument in proving for the purposes of this Motion that the Expungement Motion is “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”, for the purposes of determining whether a security for costs Order should be granted.

J. Bankrupt cannot bring the Expungement Motion because that would be allow a collateral attack on the S.38 Order:

[113] Finally, Alpa raised the issue of the Bankrupt’s intent in bringing the Expungement Motion as a means of challenging or collaterally attacking the S.38 Order, as Alpa was the creditor that obtained the S.38 Order. Alpa argued that if the Bankrupt was barred from bringing the Expungement Motion for that reason, the Expungement Motion would be “devoid of Merit” for the purposes of the tests for granting a security for costs Order.

[114] Firstly, I asked counsel whether they could provide me any jurisprudence that would suggest that if the Expungement Motion was granted, and the Alpa Proof of Claim was expunged in its entirety, that the s.38 Action would then be dismissed. None was provided in the facta or at the hearing.

[115] I note that from the Hanson Affidavit that there were other creditors that were participating in the s.38 Action, and that from the Claims Register that was Exhibit 1 to the Hanson Cross-Examination several of them, including Dolvin Mechanical Contractors Ltd. (called “Dorval” in the Hanson Affidavit) and Franline Investments Limited, have claims that are apparently not contingent, are listed as admitted for dividends, and in amounts greater than the original claimed amount in the Alpa Proof of Claim. On its own this document is not determinative evidence of their claims as admitted, but presumably the Trustee could provide that evidence by filing a report.

[116] In support of the argument regarding the prohibition on collateral attack on the S.38 Order Alpa cites Black v. NsC Diesel Power Inc., 1996 5236 (NS CA), but as counsel for the Bankrupt points out in the Bankrupt’s Factum, in that case Mr. Black the shareholder officer and directing mind of the Bankrupt company, representing himself, appeared at the hearing for the s.38 Order, having been given notice, and argued that the Moving Party was not a creditor. His arguments were rejected and the s.38 Order was granted.

[117] After the s.38 Action was commenced, Mr. Black brought his own separate civil Application to obtain an Order that the judge granting the s.38 Order lacked the jurisdiction to grant the s.38 Order, again raising the argument that the moving party who obtained the s.38 Order was not a creditor, and that the courts of Nova Scotia were not impartial and therefor the s.38 action approved by the s.38 Order should be dismissed.

[118] The judge hearing this new Application dismissed it on the basis that the Court did have jurisdiction to grant the s.38 Order as the Trustee in the case had admitted the claims, and that on this new civil application the Court did not have the jurisdiction to review the s.38 Order.

[119] Black appealed to the Nova Scotia Court of Appeal which rejected his appeal in the civil application stating:

“The appellant's attempt to challenge the validity of the s. 38 Order, in the proceeding before MacDonald, J. was a collateral attack. His application could therefore not succeed.”

[120] The case cited involving a civil motion to set aside a s.38 Order under the BIA is distinguishable on the facts from this case involving a s.135(5) BIA Motion to expunge a proof of claim. Also the very specific facts of Krupp, in my view, make it difficult to apply generally.

[121] In addition, the Bankrupt is correct when citing the decision of the Ontario Court of Appeal in Shaw Estate v. Nicol Island Development Incorporated, 2009 ONCA 276. The Court of Appeal overruled the trial judge who had relied on Krupp prohibiting a challenge of creditor status as a collateral attack on a s.38 Order stating:

“[47] In this case, relying on Krupp and Formula Atlantic, the Motion Judge held that the appellants’ challenge to the Credit Union’s creditor status was an impermissible collateral attack on the s. 38 Order. The Motion Judge’s reasons do not suggest that this holding was based on the appellants’ failure to bring a variation motion under s. 187(5) of the Act. Rather, the Motion Judge appears to have concluded that it was not open to the appellants to challenge the finding – implicit in the s. 38 Order – that the Credit Union was a creditor of Shaw. For three reasons, I disagree.

[48] First, the appellants’ objection to the s. 38 Order rested on allegations of abuse of process, non-disclosure, procedural irregularities, fraud and misrepresentation to the court. These serious claims triggered the exceptions to the restriction on standing that generally applies to challenges of s. 38 orders. They required the scrutiny of the court to ensure that the administration of justice and the integrity of the bankruptcy process had not been undermined.

[49] Second, there were two aspects to the appellants’ motion before the Motion Judge. In addition to their request that the s. 38 Order be set aside, the appellants also sought summary judgment and dismissal of the s. 38 Action. There was no restriction on the appellants’ standing to seek the latter relief. The Motion Judge was obliged to address both components of the appellants’ motion.

[50] Finally, the costs provision of the s. 38 Order exposed the appellants to potential liability for the costs of the s. 38 motion. The Credit Union accepts that the appellants had standing to seek to set aside this costs provision and, further, that it should be set aside. I agree with this concession.

[51] I recognize that the appellants did not invoke the remedial jurisdiction of the court under ss. 37 or 187(5) of the Act in their notice of motion filed with the Motion Judge. It is unclear on this record whether they relied on these statutory provisions in their submissions before the Motion Judge – neither provision is mentioned in her reasons.

[52] However, the potential application of these provisions was fully argued before this court without objection by the Credit Union. Indeed, on appeal, the Credit Union relied on s. 187(9) of the Act, although that provision was not cited by it in its cross-motion before the Motion Judge. In these circumstances, I do not regard the appellants’ failure to explicitly ‘plead’ ss. 37 and 187(5) of the Act as fatal to their standing to attack the s. 38 Order and the s. 38 Action.”

[122] The Court of Appeal also specifically states:

“ [68] However, if this statement was intended to indicate that evidence of post-bankruptcy events can never be relevant to the determination of creditor status for the purpose of a s. 38 order, I respectfully disagree. I would not rule out the possibility that post-bankruptcy events may inform a s. 38 creditor status review in a proper case. For example, evidence confirming that a creditor’s claim was paid in full after the initial date of bankruptcy and before the date of a s. 38 motion would clearly be relevant on a motion to rescind or vary a s. 38 order subsequently granted to the creditor. But that is not this case.”

[123] Accordingly, Alpa is not precluded from making arguments at the Expungement Motion regarding whether the bringing the Expungement Motion is prohibited as a collateral attack on the S.38 Order, if further jurisprudence is provided supporting the position of Alpa that a motion under s.135(5) to expunge a Proof of Claim of a creditor that has obtained a s.38 Order is an impermissible attack on the s.38 Order.

[124] However, I cannot determine, on the evidence and jurisprudence before me on this Motion, that after taking into consideration Shaw Estate v. Nicol Island Development Incorporated., which is binding upon me, that the Bankrupt is precluded from bringing the Expungement Motion because it is an impermissible collateral attack on the s.38 Order, and therefore I cannot determine for the purposes of this Motion that the Expungement Motion is “devoid of merit”, or there is “good reason to believe the claim has virtually no chance of succeeding”, in determining whether a security for costs Order should be granted.

Summary of Order Granted

[125] For all of the reasons set out above, and utilizing my Judicial discretion as Registrar under the BIA, and after taking into account all of the factors set out above as summarized by A.J. McGraw in Baca incorporating Glustein, J.’s (as he now is) summary of the tests under R.56.01 in Coastline, and taking into account the approach required in Yaiguaje 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, I find that on all of the evidence submitted by Alpa and the Bankrupt, and after considering all of the arguments made by the parties in their Materials and in Oral argument before me that:

1. under the test in 7868073 Ontario, in respect of R.56.01(1)(e), Alpa has NOT met the “high standard” for establishing that the Expungement Motion is “frivolous and vexatious”, expressed as one which “on its face, is so unreal that no reasonable or sensible person could bring it” or more simply that the Expungement Motion is “devoid of merit”; and

2. on the test in Konstantinou, that Alpa has NOT met the test set out in Rule 56(1)(e) that there is “good reason to believe” that the Expungement Motion has “…virtually no chance of succeeding”; and

3. that on the test in Yaiguaje I do not find that the overriding interests of justice make it just that the Security for Costs order requested by Alpa be made.

[126] Accordingly the Motion by Alpa for an Order compelling the Bankrupt to pay into Court the sum of $22,029.35 or in the alternative, such other amount as the Court deems is just, as security for the partial indemnity costs of the Creditor, Alpa, within fifteen days of the date of the Order requested, is dismissed.

COSTS

If the parties cannot agree on the disposition of the costs of the motion, they may make written submissions, not exceeding three pages each, the Bankrupt within 20 days, and Alpa within 40 days.

Associate Justice Ilchenko Registrar in Bankruptcy Superior Court of Justice

Released: May 2, 2022