Deng v. Nakhchi, 2023 ONSC 6095

COURT FILE NO.: CV-21-321

DATE: 20231027

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ZEYUAN DENG and MEHDI MORADI

Plaintiffs

– and –

RAOUF GHADRDOUST NAKHCHI, NOOSHIN KADIVAR, NIMA PIRAYESHAKARI and LAW OFFICES OF F HAGHIGHAT JOU

Defendants

Zeyuan Deng, Self-Represented

Pathik Baxi, for the Defendants, Raouf Nakhchi Ghadrdoust and Nooshin Kadivar

Niki Manwani for the Defendant, F.H. Jou Legal Professional Corporation, incorrectly named as Law Offices of F Haghighat Jou

Guneet Saini (Articling Student – Observing) for the Defendant, Nima Pirayeshakari

HEARD: October 24, 2023

REASONS FOR DECISION

CHARNEY J.:

1The Defendant, F.H. Jou Legal Professional Corporation, incorrectly named as Law Offices of F Haghighat Jou (“Jou Law Offices”), and the Defendants Raouf Nakhchi Ghadrdoust (“Ghadrdoust”) and Nooshin Kadivar (“Kadivar”), bring this motion pursuant to Rule 56.01(1)(a) of the Rules of Civil Procedure to require the Plaintiff, Zeyuan Deng (“Deng”) to post security for costs.

2Jou Law Offices also seeks its costs thrown away arising from its motion to strike Deng’s Claim for failure to appoint a new lawyer or serve a Notice of Intention to Act in Person. Mr. Deng finally served his Notice of Intention to Act in Person on the eve of the motion’s return date.

Facts

3This action was commenced by way of a Statement of Claim issued on January 25, 2021. The Plaintiffs seek damages against Jou Law Offices in the amount of $200,000 for breach of fiduciary duty, negligence, professional misconduct, malpractice, conspiracy to defraud, and deceit.

4The Plaintiffs seek $500,000 damages against Ghadrdoust and Kadivar for breach of fiduciary duty, fraudulent misrepresentation, conspiracy to defraud, deceit, unjust enrichment and expectation loss.

5The Plaintiffs allege that Jou Law Offices committed the above breaches by failing to provide a copy of a trust agreement purportedly prepared by Jou Law Offices between the Plaintiff, Deng and the Defendant, Kadivar. By the trust agreement, Kadivar would act as bare trustee in respect of the purchase of 348 Monarch Park Avenue, Toronto in order to obtain financing, since Deng could not qualify for a mortgage.

6Deng alleges that the property was subsequently sold without his knowledge or consent in a non-arms length transaction, at below market price. The property was sold to the Defendant Nima Pirayeshakari.

Security for Costs

7Rule 56.01(1) of the Rules of Civil Procedure provides:

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.

8The Defendants’ motion need only fit within one of the subsections listed above. In this case the Defendants rely on subsection (a) of Rule 56.01(1).

9The evidence on this motion confirms that Deng resides in Shanghai, China. Deng did reside in Canada temporarily on a student visa when he went to university, but he has not resided in Canada since March 2018 when his student visa expired. He has not returned to Canada since that date. He does not own any real estate in Canada and has no assets in Canada.

10Deng’s Statement of Claim asserts that he lives in Toronto, Ontario. Deng acknowledges that this is not true and was not true when the Statement of Claim was issued on January 25, 2021.

11Subsection (a) clearly applies in this case.

12Although the Defendants do not have an order against Deng for costs in another proceeding that remain unpaid, there are several outstanding judgments against Deng in other proceedings. These unpaid judgments total more than $1,000,000.

13On February 9, 2018, in Court File No. CV-18-591845 (Pamela Dash-Seidler v. Deng et al.), Pamela Dash-Seidler commenced an action for damages arising from Deng’s failure to close a real estate transaction. On April 3, 2019, Sossin J. (as he then was) granted judgment against Deng in the amount of $666,128.41 as well as costs in the amount of $8,000.

14That Judgment and costs remain unpaid and a writ of execution in the amount of $676,128.41 and $8,000 continues to be registered against Deng.

15On December 10, 2018, in Court File No. CV-18-00610436-0000 (Joanne Green v. Zeyuan Deng), Joanne Green commenced an action for Deng’s alleged failure to close a real estate transaction that he entered into on March 24, 2017.

16On February 2, 2022, Dow J. found that Deng breached the agreement of purchase and sale and awarded damages plus interest and costs, totaling $185,140.10.

17On December 6, 2017, in Court File No. CV-17-00587953-0000 (Bernard Dionne v. Zeyuan Deng), Bernard Dionne and Teresa Lardone commenced an action for damages for Deng’s failure to close a real estate transaction that he entered into on March 24, 2017.

18Default Judgment for $200,000 was entered on February 8, 2018.

19At his examination for discovery, Deng acknowledged that he has not paid anything towards these Judgments.

20There is a 2-step process when dealing with security for costs. The initial onus is on the defendant to demonstrate that the plaintiff appears to fit within one of the subrules of Rule 56.01(1). The Defendants have met that onus in this case; there is no dispute that Deng is “ordinarily resident outside Ontario”.

21The onus shifts to the responding party to demonstrate that an order for security of costs would be unnecessary or unjust.

22The legal principles were summarized by Master Glustein (as he then was) in Coastline Corporation Ltd. v. Canaccord Capital Corporation, 2009 CanLII 21758 (ON SC), at para. 7. That summary states, at para. 7(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.

23The Plaintiff Deng has not filed anything in response to this motion, although he did appear on the motion. Deng has not demonstrated any reason why security for costs should not be ordered against him. He does not have any assets in Ontario, and he has not demonstrated that he is impecunious.

24Indeed, given Deng’s disregard for past judgments and costs orders made against him in other cases in Ontario, it is my view that justice requires that Deng post some security for costs as a condition of proceeding with this case.

25The Defendants have each requested security for costs in the amount of $200,000 ($200,000 for Jou Law Offices and $200,000 for Ghadrdoust and Kadivar), for a total of $400,000. This amount is based on their respective estimates of the cost and disbursements of defending the action through to trial, reduced by 2/3 to reflect partial indemnity rates.

26The Defendants estimate that their partial indemnity costs to date (based on pleadings, productions and six days of examinations for discovery) are approximately $60,000 each.

27It is, in my view, still too early to know whether this action will actually proceed to trial. It is neither fair nor necessary to require Deng to post the entire security amount, covering the costs of the entire action up to the conclusion of the trial, at this stage of the proceedings. 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: Coastline, at para. 7(xiii) and cases cited therein.

28This approach is premised on the expectation that, at every stage of a proceeding, the parties will assess the strengths and weaknesses of their respective positions and that settlement will ensue when appropriate: Shuter v. Toronto Dominion Bank, 2007 CanLII 37475 (ON SC).

29In the present case, I am of the view that security for costs should be paid by installment.

Conclusion: Security for Costs

30The Defendants’ motions for security for costs is allowed.

31By December 31, 2023, the Plaintiff Deng shall pay into court as security for costs the sum of $50,000 for each of the moving parties ($50,000 for Jou Law Offices and $50,000 for Ghadrdoust and Kadivar). This represents approximate costs on a partial indemnity basis up to and including completion of examinations for discovery of all parties.

32The Plaintiff Deng may not, until the security for costs is posted, take any steps in the proceeding, except to appeal this Order, in accordance with the Courts of Justice Act and the Rules.

33Following discoveries, the Defendants, or any of them, are at liberty to move for further security.

34Costs for this motion are fixed at $5,000 for each moving party (total $10,000) payable by the Defendant Deng within 30 days.

Costs for Motion to Strike

35Jou Law Offices also claims its costs thrown away for its motion to strike Deng’s claim for his failure to appoint a lawyer or file a Notice of Intention to Act in Person until just before their motion to strike was heard.

36On October 18, 2022, Deng’s lawyer of record, Mr. Kranjc, was removed as lawyer of record for the Plaintiffs. The October 18, 2022 Order contains the usual language requiring Deng to appoint a new lawyer or serve a Notice of Intention to Act in Person within 30 days after being served with the Order; and expressly warns Deng that his failure to do so could result in his claim being struck.

37Despite this Order, over the next year, Deng failed to appoint a new lawyer or serve a Notice of Intention to Act in Person. Counsel for the Defendants warned Deng on multiple occasions that his claim could be struck for failing to do so, including at his April 18, 2023 discovery, and via emails of December 16, 2022 and February 22, 2023. The Defendants finally served Deng with the motion to strike on July 20, 2023.

38Deng did not serve his Notice of Intention to Act in Person until October 3, 2023, just two weeks before the motion was scheduled to be heard.

39Had Deng delivered his Notice of Intention to Act in Person in the timeframe prescribed by the October 18, 2022 Order, or anytime in the next eight months, Jou Law Offices would not have incurred costs in preparing materials for a motion to strike Deng’s Claim.

40I agree with Jou Law Offices that they are entitled to costs thrown away for the preparation of the motion to strike. Deng provided no explanation for his undue delay in complying with the Court Order and the several entreaties by counsel for the Defendants.

Conclusion - Costs for Motion to Strike

41Costs for the Defendant Jou Law Offices for the motion to strike are fixed at $2,000 on a partial indemnity basis, payable by the Defendant Deng within 30 days.