Court File and Parties

COURT FILE NO.: CV-17-567020 DATE: 2024 04 19

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SHAUN ROOTENBERG, Plaintiff - and - RONALD HULSE, KAREN CHADWICK, HURORSH PARTNERS INC., and TRIVIA FOR GOOD INC., Defendants

BEFORE: Associate Justice Todd Robinson

APPEARING: A. Jarvis, for the defendants (moving parties) S. Rootenberg, in person

HEARD: September 20, 2023 (by videoconference)

REASONS FOR DECISION (Security for Costs)

[1] The defendants move for security for costs from the plaintiff, Shaun Rootenberg. The motion is opposed by Mr. Rootenberg. Having considered the evidence filed and the parties’ arguments, I find that the defendants have failed to meet their threshold onuses to access security for costs. I am dismissing the motion.

MOTION BACKGROUND

[2] In this action, Mr. Rootenberg has sued the defendants seeking a variety of relief. That relief includes relief from oppression under s. 248 of the Business Corporations Act, RSO 1990, c B.16, a declaration that Mr. Rootenberg has an equitable interest in Hurorsh Partners Inc. and Trivia For Good Inc., an accounting and tracing of funds between those corporate defendants and Ronald Hulse, orders removing Mr. Hulse and Karen Chadwick as directors and officers of the corporate defendants, damages against Mr. Hulse, injunctive relief and damages for alleged defamatory conduct by Mr. Hulse, damages against Mr. Hulse for breach of fiduciary duty, and punitive damages. The core of Mr. Rootenberg’s claims arise from his alleged business dealings with and allegations of misconduct by Mr. Hulse.

[3] This motion has had a long road to the hearing before me. The defendants originally served their motion for security for costs in September 2021. A case conference to schedule the motion proceeded before Graham A.J. in November 2021. After disputes over a proposed amendments to the statement of claim, the parties ultimately agreed to a timetable for the motion in February 2022, with the motion scheduled to be heard on August 9, 2022. Disputes arose over the scope of proper cross-examination on affidavits and the motion derailed.

[4] At a further case conference before Graham A.J. on August 2, 2022, the motion was rescheduled to February 1, 2023, with another motion to amend the statement of claim and determine the scope of examinations for discovery scheduled for September 7, 2022. That motion did not proceed. Graham A.J. ultimate vacated the security for costs motion on January 4, 2023, on the basis of an indication by defendants’ counsel that the motion was not proceeding. At a case conference on February 24, 2023, Graham A.J. fixed a timetable for next steps, but did not schedule the defendants’ security for costs motion. He found that the defendants had ample opportunity to determine the plaintiff’s intentions since September 7, 2022, and to proceed with their motion. Graham A.J. held that, having failed to do so, the defendants had forgone their right to proceed with the motion.

[5] The defendants appealed Graham A.J.’s case conference order. The appeal came before Centa J. in Civil Practice Court on March 14, 2023, at which time the parties agreed that the appeal would be abandoned and a new motion for security for costs brought. This iteration of the motion was thereafter brought.

[6] The motion came initially before Jolley A.J. on April 5, 2023, at which time it was adjourned on consent to August 15, 2023, with leave granted to Mr. Hulse to argue the motion on behalf of the defendants. The timetable ordered by Graham A.J. was also amended on consent. At the return on August 15, 2023, McAfee A.J. granted the adjournment request of Mr. Rootenberg so that he could deliver materials. A timetable for materials was fixed and the next return date made peremptory against Mr. Rootenberg.

[7] The motion thereafter came before me on September 14, 2023. Mr. Rootenberg requested a further adjournment. I denied that adjournment for reasons separately given, but the motion could not ultimately be reached on my list that day and this hearing was fixed.

Relevant Law

[8] The defendants move under subrules 56.01(1)(d)-(f) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”), which provide as follows:

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,

(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.

[9] The established analysis on a security for costs motion has two stages. In the first stage, the moving defendant must show that it “appears” that one of the factors in subrule 56.01(1)(a)-(f) exists. If that is done, then it triggers the second stage, in which the plaintiff has the onus of establishing that an order for security for costs would be unjust: 2311888 Ontario Inc. v. Ross, 2017 ONSC 1295 at paras. 16-17.

[10] With respect to subrule 56.01(1)(f), the defendants submit that they are entitled to security for costs under s. 18(1) of the Libel and Slander Act, RSO 1990, c L.12. It provides as follows:

18 (1) In an action for slander, the defendant may, at any time after the delivery of the statement of claim or the expiry of the time within which it should have been delivered, apply to the court for security for costs, upon notice and an affidavit by the defendant or the defendant’s agent showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits, or that the grounds of action are trivial or frivolous, and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, and the order is a stay of proceedings until the security is given.

[11] Security for costs under s. 18(1) of the Libel and Slander Act may be sought on three grounds: (i) the plaintiff does not have sufficient assets to answer the costs of the action if the defendant were to win; (ii) the defendant has a good defence on the merits; or (iii) the grounds of action are trivial or frivolous. The grounds are disjunctive, meaning that the defendants need only demonstrate one of the three criteria: Elguindy v. Koren at paras. 24 and 31.

[12] The language of s. 18(1) also expressly provides for two preconditions in applying to the court for security for costs: (i) a statement of claim must have been delivered or the time to do so much have lapsed and (ii) the request for security for costs is supported by an affidavit “showing the nature of the action and of the defence”.

[13] Ultimately, my decision on whether to grant or deny security for costs on this motion is discretionary. Both subrule 56.01(1) and s. 18(1) of the Libel & Slander Act state that the court “may” make an order for security for costs.

[14] In considering the justness of an order, the Court of Appeal has set out that the court must take a holistic approach, examining all of the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made. Factors that may be considered include 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. There is no static list of factors to be considered. Each case must be considered on its own facts: Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at paras. 24-25.

Analysis

[15] Ultimately, on this motion, I must consider the following issues:

(a) Does the defendants’ affidavit show the nature of the action and defence? If so, have the defendants shown that: (i) Mr. Rootenberg does not have sufficient assets to answer the costs of the action if the defendants were to win; (ii) the defendants have a good defence on the merits; or (iii) the grounds of the action are trivial or frivolous?

(b) Is there good reason to believe that Mr. Rootenberg has insufficient assets in Ontario to pay the costs of the defendants?

(c) Is Mr. Rootenberg a nominal plaintiff?

(d) Is there good reason to believe that believe that this action is trivial, frivolous, and/or vexatious?

(e) Is an order for security for costs just in the circumstances of this case?

(a) Does the defendants affidavit show the nature of the action and defence?

[16] Pleadings are closed, so the only threshold requirement in s. 18(1) of the Libel and Slander Act that is material to deciding this motion is that the defendants are required to serve an affidavit “showing the nature of the action and of the defence”. The defendants have not done so.

[17] There are two supporting affidavits for this motion: one by Ronald Hulse and another by Jocelyn Jarvis, a lawyer with the defendants’ law firm. Neither speaks to the nature of Mr. Rootenberg’s claims or the defendants’ defences.

[18] The more recent affidavit of Jocelyn Jarvis essentially offers an overview of the procedural history of the action, attaching various email exchange that have occurred over the course of litigation. It does not assist the defendants in meeting the threshold evidentiary requirement in s. 18(1) of the Libel and Slander Act.

[19] The affidavit of Ronald Hulse on this motion is the same affidavit sworn in support of the defendants’ original iteration of it. It was not updated for this new motion. It outlines Mr. Hulse’s hearsay understanding from documents appended to the affidavit that Mr. Rootenberg was incarcerated for conviction on various fraud-related counts, has a writ of execution registered against him by the Royal Bank of Canada, and owes restitution arising from his conviction in the amount of $250,000. Mr. Hulse states that he terminated his relationship with Mr. Rootenberg in September 2016, “after learning of his fraudulent activities”, but does not state when or how he learned about them.

[20] Mr. Hulse also outlines his personal views that:

(a) Mr. Rootenberg has done nothing to move the action forward since it was commenced in February 2017;

(b) Mr. Rootenberg only decided to move forward after he learned that Mr. Hulse was to provide a victim impact statement at Mr. Rootenberg’s parole hearing scheduled for September 28, 2021;

(c) this action has not been brought to recover damages, but rather to deter Mr. Hulse from providing the victim impact statement, as retribution for providing it, and to force Mr. Hulse and his wife to incur unnecessary legal fees;

(d) this action and a separate action by Mr. Rootenberg were brought solely to cause Mr. Hulse (and the other defendants) financial harm;

(e) Mr. Rootenberg has not suffered any damages and neither expects nor cares to succeed in this action;

(f) Mr. Hulse has not defamed Mr. Rootenberg, tainted his reputation, or contributed to unemployability in any way;

(g) any defamation or harm to Mr. Rootenberg has been cause by various news articles about him, which Mr. Hulse appends to his affidavit;

(h) Mr. Rootenberg’s damages claim for being unemployable is frivolous since his unemployability is because he is incarcerated; and

(i) Mr. Rootenberg’s assertion that he cannot afford a place to live and to accommodate his children is frivolous since it is caused by his incarceration and, moreover, his children live with their biological mother, who is divorced from Mr. Rootenberg.

[21] Importantly, other than baldly denying having defamed or caused any harm to Mr. Rootenberg, Mr. Hulse’s affidavit does not discuss the nature of Mr. Rootenberg’s claim or the defendants’ defences. It contains speculation and opinion. Specific allegations advanced in the statement of claim are not discussed nor the defendants’ position(s) in response to them. In fact, the pleadings are not even included in the affidavit or the motion record. They were submitted as part of the defendants’ compendium for oral argument.

[22] In my view, the foregoing is sufficient to dispose of the request for security for costs under s. 18(1) of the Libel and Slander Act. The defendants have not complied with the statutory threshold requirement for content of the supporting affidavit. Neither the affidavit of Mr. Hulse nor the affidavit of Ms. Jarvis show the nature of the action and of the defence. I thereby need not consider if the defendants have satisfied any of the three requirements under s. 18(1).

(b) Is there good reason to believe that Mr. Rootenberg has insufficient assets in Ontario to pay costs?

[23] Each of subrules 56.01(1)(d) and (e) of the Rules has a common element: there must be good reason to believe that Mr. Rootenberg lacks sufficient assets in Ontario to pay the costs of defendants.

[24] Although the defendants have tendered no positive evidence on Mr. Rootenberg’s assets, Mr. Rootenberg has effectively conceded that he lacks sufficient assets in Ontario to satisfy a costs award. In his responding affidavit, Mr. Rootenberg asserts financial impecuniosity. He has produced his 2020 and 2021 tax returns, screen shots of his bank account (which he states is his only savings account), and has provided a copy of an endorsement of Brown J.A. accepting that Mr. Rootenberg lacked sufficient means to obtain legal assistance in his criminal proceeding, such that the court appointed counsel to advance Mr. Rootenberg’s appeal: R. v. Rootenberg, 2022 ONCA 28.

[25] Case law is well-established that a party asserting impecuniosity in response to a security for costs motion must provide financial disclosure with robust particularity. The evidentiary threshold for impecuniosity is high, requiring full financial disclosure 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: Coastline Corporation Ltd. v. Canaccord Capital Corporation at para. 7.

[26] The evidence tendered by Mr. Rootenberg is not sufficient to establish impecuniosity. The fact that Brown J.A. previously accepted that Mr. Rootenberg lacked sufficient means to obtain legal assistance is not dispositive on this motion. Mr. Rootenberg has not only failed to make full financial disclosure, but he has refused questions on his current financial circumstances and employment status and failed to answer undertakings that he gave to provide financial records during an examination under s. 18(2) of the Libel and Slander Act. That subsection authorized the defendants to examine Mr. Rootenberg for the purpose of s. 18(1).

[27] During the cross-examination, Mr. Rootenberg acknowledged that he had unpaid restitution orders and gave undertakings during his examination to provide the following financial information:

(a) to provide copies of restitution orders made against him and to confirm amounts that he paid both voluntarily and involuntarily towards them;

(b) to provide his last three years of tax filings, with attachments, and any notices of assessment; and

(c) to provide tax filings for 2016, 2017, and 2018, including any notices of assessments, schedules, and attachments.

[28] It is undisputed that Mr. Rootenberg had not answered these undertakings by the time of the hearing before me. The deadline to have done so had passed.

[29] For the above reasons, I am satisfied that there is good reason to believe that Mr. Rootenberg lacks sufficient assets in Ontario to satisfy a costs award and that Mr. Rootenberg has not made out his assertion of impecuniosity.

(c) Is Mr. Rootenberg a nominal plaintiff?

[30] Relief under subrule 56.01(1)(d) of the Rules has two requirements. One is that there is good reason to believe that Mr. Rootenberg has insufficient assets in Ontario to pay the costs of the defendants. The other is that Mr. Rootenberg must be found to be a nominal plaintiff. Mr. Rootenberg is neither a corporation nor a nominal plaintiff.

[31] No case law has been tendered on what constitutes a “nominal plaintiff”. The defendants submit that Mr. Rootenberg is a “nominal plaintiff” because he has no assets. That cannot be correct, since it ignores the conjunctive “and” between the two criteria in subrule 56.01(1)(d) and would make the second criteria coextensive with the first.

[32] “Nominal” as a status grammatically means that the entity or thing is in name only. The Oxford English Dictionary (online) defines “nominal” as “existing in name only; merely named (without reference to fact or reality); not real or actual.” Similarly the Cambridge Dictionary (online) defines “nominal” as “in name or thought but not in fact or not as things really are” and as being “used to describe something that is said to be a particular thing, but is not actually that thing.”

[33] Reading subrule 56.01(1)(d) in context, the concern addressed is that the named plaintiff is not the ultimate beneficiary of the litigation. The subrule could be used, for example, to seek security for costs from non-corporate entities such as an estate or trust. It may also be used in circumstances where champerty or maintenance is alleged. It is not, however, intended to provide an avenue for defendants to seek security for costs from a plaintiff who has a genuine personal interest in the outcome of the case.

[34] There is no evidence supporting that anyone other than Mr. Rootenberg stands to benefit from this action. I thereby find that he is not a “nominal plaintiff” and that the defendants are not entitled to security for costs under subrule 56.01(1)(d).

(d) Is there good reason to believe that believe that this action is trivial, frivolous, and/or vexatious?

[35] Relief under subrule 56.01(1)(e) of the Rules requires that the defendants show both that Mr. Rootenberg has insufficient assets in Ontario to pay costs and that there is good reason to believe that Mr. Rootenberg’s action is frivolous and vexatious. The defendants have not met their onus on the latter threshold requirement.

[36] The defendants’ position is that the claim is “clearly” frivolous and vexatious. However, they have tendered no evidence on the merits of the claim and defences. Mr. Hulse’s affidavit contains nothing more than assertions of frivolous claims based on speculation, opinion, and inferences from Mr. Rootenberg’s prior incarceration. Mr. Hulse does not address the allegations in the statement of claim or outline any evidence supporting the defences.

[37] The failure to address merits is significant given Mr. Rootenberg’s responding affidavit. Although the defendants argue that they were unclear if it was being relied upon until shortly before the hearing, it was sworn in July 2022 and directly responds to Mr. Hulse’s affidavit used on this motion. It was sworn in the context of the last iteration of this motion. There is no dispute that the defendants had the affidavit. Since they are relying on Mr. Hulse’s affidavit from the prior motion, it was reasonable to assume that Mr. Rootenberg would rely on his own affidavit sworn in response to Mr. Hulse’s affidavit.

[38] The affidavit was addressed by both sides in oral argument. Admissibility was not challenged by the defendants, but I would have granted leave to Mr. Rootenberg to rely on it in any event for the above reasons.

[39] Mr. Rootenberg’s affidavit discusses in detail his partnership with Mr. Hulse, the alleged misconduct by Mr. Hulse, and factual evidence underpinning the claims. The evidence supports Mr. Rootenberg’s claims. Mr. Hulse did not deliver any reply affidavit challenging Mr. Rootenberg’s narrative of events or the allegations of Mr. Hulse’s own conduct. It is entirely unanswered by any evidence tendered by the defendants.

[40] Having failed to respond to Mr. Rootenberg’s evidence on the merits of his claims in this action, which the defendants have apparently had since July 2022, I find no good reason to believe that this action is frivolous or vexatious. Mr. Hulse’s personal views and opinions are insufficient to discharge the defendants’ threshold onus.

(e) Is an order for security for costs just?

[41] Given the foregoing, I need not consider the justness of the case. The defendants have not met their onus. Their motion is thereby properly dismissed.

Costs

[42] Mr. Rootenberg has been successful in opposing the motion. He seeks no costs of the motion. There shall accordingly be no costs awarded.

Disposition

[43] For the foregoing reasons, the defendants’ motion is dismissed without costs.

ASSOCIATE JUSTICE TODD ROBINSON DATE: April 19, 2024