COURT FILE NO.: CV-21-00004196-0000 DATE: 2023 06 26

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ALEXANDRA TANG, 2505006 ONTARIO CORPORATION, 2510516 ONTARIO LTD.

AND: XPERT CREDIT CONTROL SOLUTIONS INC. aka RIGHT CHOICE BUILDERS INC., XPERT CREDIT CONTROL, SAM JOSHI aka SANJIVE JOSHI, SHAN MANGAL, PYRAMID PROPERTIES MANAGEMENT & CONSTRUCTION INC., 2748236 ONTARIO INC., SHAYNA DALLAS aka SHAYNA NASCIMENTO aka SHAYNA KASH aka SHAYNA LAURENT aka SHAYNA LAUREN ELIZABETH DALLAS, 2697909 ONTARIO INC., BHALLA AJIT, GURPAL SINGH

BEFORE: Justice L. Ricchetti

COUNSEL: A. Jarvis for the Plaintiffs; J. Thomas for Defendants, Shan Mangal, 2748236 Ontario Inc. and Pyramid Properties and Construction Inc.; P. Smiley, agent for R Das counsel for Defendants, Xpert Credits Control Solutions Inc., Xpert Credit Control and Sam Joshi; K. Randhawa, for Defendant, Gurpal Singh; and S. Chhina, for Defendant, 2697909 Ontario Inc and Shayna Dallas.

HEARD: June 16, 2023, Video Conference

Endorsement

The Motion

[1] This is a motion by the Defendants’ Shayna Dallas (Dallas) and 2697909 Ontario Inc. (269 Ont.), Shan Mangal (Mangal), Pyramid Properties Management & Construction Inc. (Pyramid), 2748236 Ontario Inc.(247 Ont.), and Gurpal Singh (Singh) (Moving Defendants) for an order that the Plaintiffs post security for costs.

Background

[2] The Plaintiffs owned a vacant property at 1073 Westmount Avenue, Mississauga, Ontario. (Property).

[3] Essentially, the Property was sold by a mortgagee under a power of sale in late 2020.

[4] There were extensive dealings with the Property involving the Defendants. In 7 ½ months (August 2020 to April 2021) there were 9 dealings with the Property (5 after the power of sale). A summary of some of those dealings and the relationship between the parties are set out by Justice Daley in Tang v. Xpert Credit Control Solutions Inc., 2022 ONSC 1493.

[5] The Plaintiffs’ claim that 269 Ont. was not a bona fide purchaser and conspired with the other Defendants to defraud the Plaintiffs of the Property through the sale and their subsequent dealings with the Property.

[6] The Statement of Claim was issued in November 2021.

[7] After the Claim was served in late 2021, counsel for Mr. Singh, advised that he would be seeking security for costs. However, no motion was forthcoming until this motion in the middle of 2023 (after the court advised that this matter might be tried in September 2023).

[8] The Plaintiff obtained a CPL on February 23, 2022.

[9] On April 19, 2022, this court ordered that this action, and other related actions involving the Property, and some of the same parties, being CV-19-5126 and CV-19-5127, be tried together.

[10] There are numerous claims made amongst the parties to this proceeding. For example:

• In CV-19-5127, Xpert Credit Control Solutions Inc. is a plaintiff and the Plaintiffs in this case are the defendants.
• Dallas and 269 Ont. have counterclaimed against the Plaintiffs in this action.
• Mangal, Pyramid have cross claimed in this action.
• Singh has also counterclaimed and cross claimed in this action.

[11] An accounting of the various mortgages and loans (including source and distribution of monies from the various transactions), remains outstanding from the Defendants despite the fact this action is more than 1 ½ years old. Some of the issues are whether the Power of Sale Notice was valid, whether the Property was sold below market value, whether the subsequent encumbrancers are valid and bona fide, and what if anything is owed under any of the registered mortgages. There are many unanswered questions in this proceeding regarding the Property that need to be determined at a trial.

[12] Some of these issues were described by J. Daley in his reasons in Tang supra:

[24 ] During the course of the investigation conducted on behalf of the plaintiffs, it was discovered that there was another action, namely action number CV-21-1352, involving the defendant Shan Mangal (“Mangal”), the defendant Dallas and 269 as defendants in respect of a failed loan from a plaintiff Linda Anand. In that action the defendants filed a statement of defence wherein they assert that the Property had a value of $870,000 at the point in time while the defendants were attempting to arrange financing prior to the closing of the transaction in December 2020.

[25] Although the recorded purchase price as paid by 269 on the acquisition of the Property was $700,000, in fact $60,000 of that amount related to unexplained fees and as such the net consideration on the actual sale of the property was $640,000.

[26] Having declared in their statement of defence in the related action that the property had a value of $870,000, when in fact the transaction that resulted in 269 acquiring title to the Property involved net consideration of $640,000, prima facie it appears that the Dallas Defendants acquired title to the Property at far less than fair market value.

[27] Therefore, on this record, I conclude that the Dallas Defendants and in particular the defendant 269 was, in all probability, not a bona fide purchaser for value given the very substantial difference of $230,000 between the declared value of $870,000 and the net purchase price of $640,000 which was allegedly paid on closing at the time the property was conveyed to 269.

[28] Contrary to the position as to the value of the Property set forth in the above referenced statement of defence, in the defendant’s pleading filed in this action the defendants assert the value of $700,000 for the Property.

[13] One of the persons dealing with the Property, on behalf of the owners, was Ms. Dallas who could not answer fundamental questions regarding the Property. Again, referring to J. Daley’s reasons in Tang supra:

[32] By way of examples, this defendant was unable to provide information and answers to the following questions: (1) what deposit was to be paid in the transaction between 269 and 274? (2) was the $10,000 deposit called for in the APS paid? (3) did Mangal and his corporation have a financial interest in 269? (4) did she have a lawyer review the APS before she signed it? (5) did 269 have any funds in hand when the APS was executed? (6) when was a building permit applied for and did she pay for it? (7) when was building scheduled to commence on the vacant Property? (8) what lawyer did she use for the purchase of the Property and for the Ajit loan and where was her lawyer’s office located? (9) what harm would occur if a CPL was granted? (10) while Ms. Dallas alleges that she is an investor in the Property she was unable to state how much money she had invested.

[35 ] Furthermore, the uncontradicted and unexplained evidence is that the defendant Dallas signed two sets of documents relating to the title to the Property, on behalf of corporations when she had no authority to do so.

[36] Firstly, this defendant is shown as the signing authority on behalf of 274 in completing the Transfer of Charge from 274 to Gurpal Singh, dated December 23, 2020 which was to be registered in Land Titles as against the Property. There is no dispute by the defendant that she had no authority whatsoever to execute documents on behalf of 274.

[37] Next, on December 24, 2020 the defendant Dallas signed a charge to be registered against the Property purporting to be a duly authorized signing authority for 250, wherein she is also identified as a guarantor. Again, it is acknowledged that this defendant had no authority whatsoever to sign that charge or the Acknowledgement and Direction that related to it, which she also executed on behalf of 250.

[14] There have been difficulties getting this case for the exchange of complete documentation, complete examinations for discovery to move forward to a trial, referred to as Defence “stonewalling” and “hardball tactics” by Justice Daley in his reasons in Tang supra.

[15] The record shows the difficulties encountered to move this matter forward:

• Failure by the Defendants to respond to a Request to Admit, resulting in a motion to withdraw deemed admissions, which continues to be outstanding after more than one year.
• Some of the Defendants refused to answer questions during a previous examination resulting in a motion. See J. Trimble endorsement dated January 9, 2023.
• The Dallas defendants failed to answer undertakings and failed to pay costs orders. Attempts to have an examination in aid of execution has been thwarted. The result was a contempt motion which remains outstanding.
• The Plaintiffs had to obtain an order to get Ms. Dallas and 269 Ont. to attend an examination and produce documents. See J. Kumaranayake’s endorsement dated January 12, 2023. Not all of those documents ordered produced have been provided.
• Despite all the parties who claim an interest in the Property, including encumbrancers, no one appears to be paying the Property’s real estate taxes, either before or after the sale. This despite the fact that the Municipality could eventually sell the Property and outstanding taxes would be a first charge.
• An accounting of the alleged source and distribution of mortgage funds remain elusive. For example, one of the mortgages to Mr. Singh for $500,000 was registered, yet, $250,000 was advanced to his son – With NO EXPLANTION.

[16] Simply put, there remain many serious and important issues unanswered. The difficulties to obtain that information through discoveries and examinations continue to be a major challenge for the Plaintiffs.

The Law

[17] The Rules of Civil Procedure provide:

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.

(Emphasis added.)

[18] It is clear from the wording of the Rule that, even when one or more of the factors exist, granting an order requiring a party to post security for costs, is discretionary.

[19] The words “ordinarily resident in Ontario” must mean currently resident in Ontario at the time of the motion. Rule 56.07 permits the court to increase or decrease the amount of security for costs posted should the circumstances change after an order for security for cost is made.

Analysis

[20] The Plaintiffs do not allege impecuniosity.

[21] For the reasons that follow, I am satisfied that it “appears” the Plaintiff Tang is not ordinarily resident in Ontario at this time.

[22] For the reasons that follow, I am satisfied there is good reason to believe that the Plaintiffs do not have sufficient assets in Ontario to pay a cost award if made against them.

Ordinarily Resident in Ontario/ Assets in Ontario to pay Costs if ordered

The Plaintiff Tang

[23] The Plaintiff Tang submits she is ordinarily a resident of Ontario. The test is residency, not citizenship.

[24] I reject this submission.

[25] Ms. Tang left Canada in 2019. She cares for her mother in China.

[26] Ms. Tang currently resides in China and has done so since 2019. Ms. Tang has not returned to Canada in the past 3 ½ years.

[27] Aside from the Condominium described below, there is no evidence that any of the Plaintiffs have any assets in Canada.

[28] Ms. Tang states that IF her mother dies, she will return to Canada. That is contingent. The timing is entirely unknown. Whether she will return if her mother dies is speculative. An intention to regain ordinary residence in Ontario is not being currently ordinarily resident of Ontario. There is no guarantee Ms. Tang will resume residency in Ontario, especially if a cost award is made against her at trial.

[29] Ms. Tang’s statement that she has a “life in Ontario” but, aside from a Condominium here, which is occupied by a third party, and a son, she has no other substantial and compelling connection.

[30] Ms. Tang points to the Ontario companies she owns (she is the sole director) as businesses in Ontario to demonstrate her connection to Ontario and the reason why she will return to Ontario whenever she is able to in the future. However, Ms. Tang refuses to produce documentation to show that these companies are active businesses, have any assets, or generate any current income. Her explanation for refusing to provide this information, being a fear of producing this information to defendants she alleges have committed a fraud, is rejected by me as a bald allegation. Besides Ms. Tang has made no attempt to seek any protection (i.e. redactions, confidentiality agreements) nor set out any reason why documents, such as filed tax returns, for these companies should not be produced.

[31] Being a director, even a sole director, of Ontario corporations does not give a person ordinary residence in Ontario. Nor is it necessarily a compelling reason to return to Ontario.

[32] Reference to another corporation (which is not a plaintiff) does not assist Ms. Tang as there is no evidence this other corporation has assets or is an ongoing successful business.

[33] Ms. Tang won’t produce her tax returns to show she that she has filed Canadian Tax Returns showing / declaring that she is a resident of Canada/Ontario. An inference to be drawn is that she is not declaring Ontario to be her residence in the past 3 plus years.

[34] The fact that Ms. Tang is a licensed real estate agent, has a son living in Ontario, has applied for visa for her mother does NOT make Ms. Tang currently “ordinarily resident” in Ontario.

[35] Ms. Tang is not ordinarily resident in Ontario.

The Corporations

[36] There is no evidence any of the Plaintiff corporations own property in Ontario or have other assets in Ontario.

[37] As stated above, financial information about the Plaintiff corporations has not been produced by Ms. Tang.

[38] The Plaintiff corporations have not demonstrated they have assets in Ontario to satisfy a cost award.

The Property

[39] I am not persuaded that the Property, of which the Plaintiffs have a defended claim to, is an asset or even a contingent asset in Ontario for the purpose of this motion.

The Condominium

[40] Ms. Tang points to a condominium at 25 Kingsbridge Circle, Mississauga (Condominium).

[41] Jeff Hanna resided in the Condominium and apparently has done so since 2019.

[42] The Condominium has registered on title mortgages totalling $1,869,000.

[43] Whether the Condominium is valued at $1.5-1.6 million as the Defendants suggest or $1.7-1.8 million, it is highly uncertain whether there will be any NET proceeds of sale should the Condominium need to be sold by an execution creditor – such as one with a cost award judgment.

Conclusion on Ordinarily Resident/Assets in the Jurisdiction

[44] I conclude that Ms. Tang is not ordinarily resident in Ontario.

[45] I conclude that neither Ms. Tang nor the Plaintiff corporations have assets in Ontario to pay a cost award that may be made against them at trial.

The Merits of the Plaintiffs’ Claim

[46] It is difficult for a court to assess the merits of the claim and the defences on these types of motions.

[47] That is particularly so where there are complex, competing factual and legal positions taken by the parties. This is not a summary judgment motion.

[48] However, I reject the Defence submission (and position taken on the cross examinations) that merits are entirely irrelevant on such a motion. Where the Plaintiff’s claim appears to be frivolous or devoid of merit, it is obvious this would be a significant factor in favour of granting an order for security for costs. Where the defence appears to be frivolous or patently devoid of merit, this would be a significant factor in favour of not granting an order for security for costs. To suggest otherwise makes no sense.

[49] But merits cannot always be assessed on these motions at opposite ends of the spectrum. Where the Plaintiff can establish that it has a “good chance of success”, that too is a legitimate factor for the court to consider when deciding whether it would be unjust to grant the motion for security for costs. See Bruno Appliance and Furniture, Inc. v. Cassels Brock & Blackwell LLP, 2012 ONSC 2197

[16] The plaintiffs had mistakenly pegged the standard too high in their argument. It is not necessary that the plaintiffs show that their case has an overwhelming likelihood of success. Rather, they have to demonstrate that they have “a good chance of success”. In Zeitoun, supra , Low J. for the Divisional Court stated as follows at paras 48-50:

The motions judge held that the master had erred in imposing too high an onus on the plaintiff in relation to the merits of the action. I am, with respect, unable to concur. There is a difference in the quality of the evidence required depending on whether or not the plaintiff is able to show impecuniosity.

Where impecuniosity is shown, the plaintiff needs only to demonstrate that the claim is not plainly devoid of merit. (See John Wink Ltd. v. Sico Inc., (1987), 57 O.R. (2d) 705 (H.C.J.)) That is a very low evidentiary threshold.

Where impecuniosity has not been shown however, a closer scrutiny of the merits of the case is warranted; in those cases there is no compelling argument that there is a danger that poverty of the plaintiff will cause an injustice by impeding pursuit of a claim that otherwise would have been permitted to be tried. Where impecuniosity has not been shown, a legitimate factor in deciding whether or not it would be just to require security for costs is whether the claim has a good chance of success. ( Emphasis added)

[17] Further, Code J. in Cigar 500.com Inc. v. Ashton Distributors Inc. et al in following Zeitoun, supra stated at para. 69 that the test is “a good chance of success”.

[50] Accordingly, the merits are relevant on security for costs motions. That point was also made clear in Zeitoun et al v. The Economical Insurance Group, 2008, 91 O.R. (3d) 131 (Div. Ct.):

[50] Where impecuniosity has not been shown however, a closer scrutiny of the merits of the case is warranted; in those cases there is no compelling argument that there is a danger that poverty of the plaintiff will cause an injustice by impeding pursuit of a claim that otherwise would have been permitted to be tried. Where impecuniosity has not been shown, a legitimate factor in deciding whether or not it would be just to require security for costs is whether the claim has a good chance of success.

[51] The fact that the plaintiffs adduced no evidence going to the merits of the action is clearly a failure to show that the claim has a good or even a reasonable chance of success and is, in my view, also a failure to show that the claim is not devoid of merit or not bound to fail. …

[51] The role and significance of the merits was recently reaffirmed in Parravano v. St. Paul Fire and Marine Insurance; 2023 ONSC 3480, where Associate Justice Graham, set out the approach on Rule 56.01 motions:

[13] Counsel agree that the application of rule 56.01(1) is guided by the decision in Coastline Corporation Ltd. v. Canaccord Capital Corporation et al.. In para. 7 of that decision, Master Glustein (as he then was) summarized previous case law:

• 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), 70 O.R.(2d) 119 (H.C.J.) at 123);
• 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 at para. 4);
• 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), 69 O.R.(3d) 175 (S.C.J.) at para. 12);
• 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), 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);
• Merits have a role in any application under Rule 56.01, but in a continuum with Rule 56.01(1)(a) at the low end (Padnos v. Luminart Inc., [1996] O.J. No. 4549 (Gen. Div.) (“Padnos”), at para. 4; Bruno, at para. 36);
• 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);
• “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);
• 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] O.J. No. 3435 (S.C.J. – Mast.) (Shuter) at para. 76);
• 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), 50 O.R.(2d) 575 (S.C.O. – Mast.)) (As indicated below, Mr. Parravano acknowledges that his evidence does not demonstrate that he is impecunious so I have omitted from this review of the law the requirements upon a plaintiff who raises impecuniosity as a defence to a security for costs motion.)

[14] Both counsel also rely on Yaiguaje v. Chevron Corp., 2017 ONCA 827, in which the Court of Appeal confirmed the approach to be taken in determining whether a security for costs order is warranted (at paras. 24 and 25):

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 litigation. [citations omitted]

25 . . . [E]ach 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 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.

[52] In this case, the Plaintiffs were not able to rebut their onus to establish that an order for security would be unjust as the moving Defendants refused, during cross examinations, to answer any questions with regards to the merits. This put the Plaintiffs at a serious disadvantage and thereby prejudiced their potential success on the motion.

[53] On this basis alone, I would dismiss the moving Defendants’ motion for security for costs.

[12] However, there are additional factors which satisfy me that ordering security for costs on this motion would be unjust. In the exercise of my discretion, even if the moving defendants had not obstructed the cross-examinations by refusing to answer all questions on the merits, I would have dismissed the motion for the following reasons:

a) The court has already found there are serious issues regarding the dealings by these parties (Plaintiffs and Defendants in the three proceedings) with the Property. While I do not go so far as to suggest there is “prima facie” fraudulent dealings, there is some evidence of highly questionable dealings with the Property. b) The Defendants have engaged in conduct this court has called “hard ball litigation” and stonewalling. The Defendants continue to be obstructive on obviously relevant issues. For example, Ms. Dallas was asked if she was acting as a “front person” for Mr. Mangal (one of the moving parties) and the question was refused as irrelevant. The allegations in the Statement of Claim makes this an obviously relevant question. This is just one example of the way in which the Defendants have chosen to obscure the dealings with the Property. c) There is considerable missing relevant information being withheld from the Plaintiffs:

• Some of the Defendants have failed to produce accounting documentation on the mortgages and the source/flow of mortgage funds, mortgage statements, all of which are clearly relevant to show the bona fides of the transactions at issue. d) The Defendants have failed to answer undertakings from their discoveries. There are numerous claims by the Plaintiffs, and amongst the Defendants who dealt with the Property in these three proceedings, such as cross claims, counterclaims. e) There was a significant delay in bringing this motion. This motion for security for costs was identified in 2021. Yet, no motion was brought until this court indicated the actions could be tried in 2023. The Plaintiffs have incurred significant legal fees to date (particularly due to the litigation tactics of the Defendants). This motion should have been brought much earlier and before the Plaintiffs incurred substantial costs. Now, the Defendants seek to inflict further financial “pain” on the Plaintiffs. No satisfactory explanation was advanced why not? In these circumstances, the Plaintiffs are prejudiced. See Wilson Young & Associates Inc. v. Carleton University et al, 2020 ONSC 4542 at para. 59.

Conclusion

[54] The motion is dismissed.

Costs

[55] If the parties cannot work out the issue of costs, either party seeking costs can provide written submissions (5 pages max) plus Offers to Settle plus authorities within 2 weeks of the release of these reasons.

[56] A party against whom costs are claimed, can provide written submissions (5 pages max) plus Offers to Settle plus authorities within 2 weeks of the release after the release of the cost submissions claiming costs against them.

[57] There will be no reply submissions.

Released: June 26, 2023 RSJ Ricchetti