Telecore v. Attorney General of Canada, 2025 ONSC 2863
Court File No.: CV-18-00077294-0000
Motion Heard: March 18, 2025
Superior Court of Justice – Ontario
Between:
Telecore, Plaintiff
and
The Attorney General of Canada, Defendant
Before: Associate Justice Perron
Counsel:
- Joseph O’Regan, for the Plaintiff
- Taylor Andreas and Heather Kennedy, for the Defendant
Heard: March 18, 2025
Endorsement
Introduction
This is a motion by the Defendant, the Attorney General of Canada, seeking an order for security for prospective costs of the action in the amount of $150,000 to be paid in three tranches.
This motion was originally before me on February 6, 2025 but was adjourned to today as a result of late-filing of material by the AGC. I note that the motion was originally returnable in October 2024 but was also adjourned at that time as the parties were disputing the mode of appearance for the hearing of the motion.
This action was commenced in 2018. The Plaintiff, 1117322 Ontario Inc. c.o.b. as Telecore, first attempted to set the action down for trial and deliver a Trial Record on April 24, 2024. The Court did not accept Telecore’s Trial Record on its first attempt at filing it as there were deficiencies in the record.
However, on April 26, 2024, and only after Telecore’s first attempt to set the matter down for trial, the AGC signaled its intention to bring a motion for security for costs and served a draft Notice of motion.
Ultimately, the Trial Record was successfully filed on May 7, 2024. The pre-trial is scheduled for April 28, 2025 and the ten-day trial is set to commence on March 16, 2026.
The Law
A preliminary question on this motion is whether the AGC requires leave to bring this motion given that the action has been set down for trial. Telecore did not raise this issue specifically in its factum but it did upload caselaw to Case Centre, including Valemont Group Ltd. v. Philmor Goldplate Homes Inc., 2010 ONSC 1685 which deals with the requirement for leave to bring a motion after an action is set down for trial. Valemont is a case that dealt with the former iteration of Rule 48.04(1) which required leave for certain steps after a party set an action down for trial or consented to the action being placed on a trial list. To the extent this issue remains relevant, I agree with the AGC that as a result of amendments made to Rule 48.04(1) in 2021, since the AGC is not the party who set the action down for trial, the AGC does not require leave to bring this motion.
The AGC moves under subrule 56.01(1)(d) and (e) which provide as follows:
The court, on motion by the defendant in a proceeding, may make such order for security for costs as is just where it appears that:
(d) the plaintiff is a corporation and there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant; or,
(e) there is good reason to believe that the action is frivolous and vexatious and that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant.
The applicable test provides that the moving party must show that the case falls within one of the circumstances for which security for costs may be ordered. To meet the onus under subparagraph 56.01(1)(d), the evidentiary onus is low and the defendant must only show that there is a good reason to believe that the plaintiff has insufficient assets to satisfy a cost award (Health Genetic Center Corp v. Reed Business Information Ltd., 2014 ONSC 6449 at para 16).
Once the moving party has met this burden, to avoid the order, the responding party must show that security is unnecessary because it has sufficient exigible assets in Ontario, or that it should be permitted to proceed to trial despite its inability to pay costs (Chill Media Inc. v. Brewers Retail Inc., 2021 ONSC 1296 at para 10).
With respect to subrule 56.01(1)(e), the Court will consider whether there is good reason to believe that the claim is frivolous and vexatious. This involves assessing the merits based on the available record, including the pleadings and the evidence filed in support of the motion (Chahal v. Abdullah et al., 2022 ONSC 1727 at paras 41-44).
An order for security for costs should only be made where justness demands it, and the Court must be vigilant to ensure that the motion is not used as a litigation tactic to prevent the case from being heard on its merits. The Court must consider the matter holistically, “with the interests of justice at the forefront”, and has broad discretion to make any order that is just in the circumstances (Chill Media at para 15, Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at paras 22-23).
The factors to be considered in determining justness are not static but, depending on the facts of each case, may 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 and the public importance of the litigation (Yaiguaje at paras 24-25).
A plaintiff who relies on impecuniosity bears the onus of proof and must provide full and frank disclosure to satisfy the Court that it is genuinely impecunious. This represents a high evidentiary burden which includes, for corporate plaintiffs, proof that the corporation cannot raise funds from its shareholders and associates. A bald assertion of impecuniosity is not sufficient. Where impecuniosity is shown, the plaintiff needs to only demonstrate that its claim is not plainly devoid of merit (Chill Media at paras 11-14).
However, if the plaintiff fails to provide impecuniosity, it will have to “do more than establish that the claim is not frivolous or vexatious [and] must establish that the claim has a good chance of success” (Chahal v. Abdullah et al., 2022 ONSC 1727 at para 47). Courts have also expressed this onus as a requirement to “demonstrate a stronger case on the merits or some other reason to justify the court not ordering that security be posted” (Chill Media at para 14).
That said, at the stage of considering the merits of the case, the Court is not to embark on an analysis such as on a summary judgment motion. “An assessment of the merits should only be decisive where the merits may be properly assessed on an interlocutory application and success or failure appears obvious.” (2455993 Ontario Inc. v. Solace Is Comfort Inc., 2024 ONSC 6930 at para 16). For complex cases, or if the issues will turn on questions of credibility, courts have found that it is “generally not appropriate to make an assessment of the merits at the interlocutory stage” (Nehaus Management Ltd. v. Ding, 2024 ONSC 6144 at para 18).
Facts and Analysis
- The facts in this matter have been succinctly set out in previous endorsements by the Court, including Associate Justice Fortier’s endorsements dated November 5, 2021 and May 17, 2023. I have also reviewed the facts as set out in the parties’ materials and need not repeat them here. Suffice it to say that this is a procurement action arising from Telecore’s unsuccessful bids in response to three RFPs related to communication headsets used by the Department of National Defence. The RFPs are referred to in the parties’ materials as RFP 1, RFP 2 and RFP 3 which were issued in March 2016, July 2016 and February 2019 respectively. The total damages being sought by Telecore in this action exceed $1,000,000.
Insufficiency of Assets
- The AGC has met its initial onus. There is good reason to believe that Telecore has insufficient assets in Ontario to pay a costs award based on the evidence being relied upon by the AGC including the following:
a. Mr. O’Regan’s evidence at examinations for discovery on November 5, 2019 included the following:
i. Telecore acts as a broker to obtain contracts for goods for third party manufacturing companies. Its profits are derived from a markup on selling the third party’s goods in the telecommunications sector.
ii. Telecore does not manufacture goods of any kind or hold its own inventory.
iii. Mr. O’Regan is the founder and CEO of Telecore. Telecore has no employees although it occasionally has contractors.
iv. Mr. O’Regan has been the sole shareholder since approximately 2016.
b. The Amended Amended Statement of Claim dated January 12, 2022 indicates an address for service on Robertson Road. A Reply factum by Telecore dated September 13, 2022 indicates a different address for service on Gladstone Avenue. The AGC conducted an online search of that address in September 2024 and learned that the Gladstone address is a residential apartment building subsidized as community housing for seniors.
c. On April 9, 2024, the AGC obtained a Corporate Profile report which indicates that Mr. O’Regan was Telecore’s sole director and officer. The report also indicates that no filings have been made to the ministry since 2020 and that the last annual return by the corporation was filed in 2006.
d. On April 24, 2024, the AGC obtained an Equifax report and other searches indicating that Telecore has no assets or liabilities information.
Telecore does not dispute that it has insufficient assets in Ontario to pay costs. The more contentious point is whether or not Telecore is impecunious.
There is some confusion on Telecore’s position regarding impecuniosity in the materials. Mr. O’Regan asserted that there was “no reason to presume impecuniosity” in an email to the AGC on October 31, 2024. In his affidavit he says: “Although where I could be considered relatively poor at this time, it cannot be said that I am completely impecunious.” In Telecore’s factum, it takes the position that it is impecunious and that it does not contest the AGC’s allegations that Telecore is impecunious (which is a misstatement of the AGC’s position). During his submissions, Mr. O’Regan confirmed that he takes the position that Telecore is impecunious.
The AGC submits that Telecore has failed to meet its burden to prove impecuniosity and that it has not made full and frank disclosure of its financial circumstances. The AGC also submits that if Telecore was going to assert impecuniosity, it should have done so much sooner.
When I consider the evidence on this issue as a whole, I am satisfied that Telecore is impecunious and that it does not have access to assets or means to fund security for costs.
Mr. O’Regan has been forthcoming about his personal financial situation as well as Telecore’s. Mr. O’Regan is 74 years old and earns less than $20,000 per year from his pension. He lives in subsidized housing for seniors that is adjusted to income.
Mr. O’Regan previously owned a condominium unit which was sold in 2022 by power of sale. He continues to be embroiled in litigation with the mortgagor and the condominium corporation over what he considers to be an unsupported and excessive lien registered against his unit. While Mr. O’Regan has produced evidence supporting his belief that there was approximately $185,000 of equity in the condo, and that the mortgagor owes him surplus funds of approximately $80,000, these interests cannot be considered as assets. At best, I would describe these as highly contingent claims. I also note that in an endorsement dismissing Mr. O’Regan’s motion for partial summary judgment in the condominium action in 2021, Associate Justice Kaufman found that Mr. O’Regan’s income was $8,689 for the previous year and fixed costs in favour of the condominium in the amount of $13,500 if the condominium was successful in the cause. Although not in his affidavit, Mr. O’Regan indicated during his submissions that he owes his two brothers $50,000 for the purchase of the condominium. The AGC does not take the position that these contingent claims constitute assets.
Mr. O’Regan and Telecore have access to approximately $30,000 in credit facilities between credit cards and a corporate line of credit. The credit facilities have varied interest rates with interest as high as 28%.
As indicated above, the AGC relied on some of the evidence regarding Telecore’s operations to meet its initial burden that there is good reason to believe that Telecore has insufficient assets to pay costs. However, the evidence being relied upon by the AGC for that purpose also strongly suggests that Telecore is inactive including the fact that it has not filed an annual return since 2006.
Mr. O’Regan’s evidence is that Telecore’s business was impacted by the covid pandemic and that revenues since 2020 have been negligible. He also indicated that his energies have been focused on this lawsuit and the other lawsuits in which he is involved and that this has affected his ability to work on Telecore’s business. The AGC did not challenge this evidence or offer any evidence to contradict Telecore’s grim state of affairs.
At discovery, Mr. O’Regan advised that Telecore’s clients were “predominantly” government clients. Without making any determinations on the merits at this stage, I have also considered the allegation that the subject-matter of this action would be a contributing factor to Telecore’s financial difficulties and lack of assets.
In support of its position that Telecore is impecunious, Mr. O’Regan also produced a very short affidavit attaching what appears to be various printouts from Telecore’s tax filings showing that Telecore has no outstanding tax returns and a zero-balance owing for 2019 to 2023. The affidavit also attaches end-of-year bank account statements from Telecore’s TD bank account from 2020 to 2024 which show end-of-month balances in the amount of $4,750.26, $6.09, $83.42, $56.96 and $98.71 respectively.
The AGC objected to the affidavit being admitted as evidence on the basis that it was produced late, despite the timetable that I ordered in February 2025. However, the AGC did not request a further adjournment of the motion to consider this evidence. Furthermore, the AGC chose not to conduct cross-examinations on any of the affidavits submitted by Telecore on this motion.
Given that this supplemental affidavit was very short and contained evidence that is directly relevant to the issues on this motion, and that the evidence simply supports the allegations made by Mr. O’Regan in his affidavit, I have also considered this evidence in coming to my determination that Telecore is impecunious.
Although the evidence produced is not perfect and there are gaps (i.e. no financial statements or income tax returns), given the level of disclosure by Mr. O’Regan of his personal circumstances, and given that he is Telecore’s sole shareholder, this case is distinguishable from the caselaw being relied upon by the AGC where corporate plaintiffs failed to produce evidence as to whether or not their shareholders could fund security for costs. Furthermore, this is not a case where the plaintiff has only made bald assertions of impecuniosity without any support. There is ample evidence to support that Telecore and Mr. O’Regan cannot fund this action.
Mr. O’Regan submitted that if he had to pay $30-40,000 in security for costs he would be bankrupt. The only potential means available to Telecore to pay some security would be to charge up its line of credit and Mr. O’Regan’s personal credit cards. This would result in approximately $30,000 of maximum security being available which falls short of the amounts required and/or requested to fund the balance of the action. I accept Mr. O’Regan’s submissions that he and Telecore would not be able to afford the cost of borrowing and carrying this debt.
As such, I find that Telecore is impecunious and that it lacks the assets and financial means to post security to fund the prospective costs of this action.
Merits of the Action
Having found that Telecore is impecunious, Telecore must show that its claim is not plainly devoid of merit and that justice demands that it be permitted to continue with the action (2455993 Ontario Inc. v. Solace Is Comfort Inc., 2024 ONSC 6930 at para 10).
The AGC’s position is that the claim in respect of RFP 1 is either statute-barred or subject to issue estoppel based on the CITT’s dismissal of Telecore’s complaint. For RFP 2 and 3, the AGC takes the position that it rightfully rejected Telecore’s bids as they were non-compliant. For RFP 3, the AGC also maintains that it properly refused the request for schematics on the basis that these were subject to intellectual property and it points to the fact that other bidders were able to submit bids based on the information provided and despite the alleged missing statements of work. Generally, the AGC takes the position that each of Telecore’s claims must fail because Telecore’s claims are deficient on their face (i.e. Telecore has not plead the constituent elements of each tort, no duty of care, no contract ‘B’) and/or Telecore has not provided evidence in support of its claim (i.e. no evidence to contradict the intellectual property claim or that the AGC negligently or fraudulently refused to disclose designs).
Telecore’s position is that RFP 1 is not statute-barred on the basis of a rolling limitation period triggered by RFP 2. Telecore’s affidavit alleges a long history of breaches of disclosure and fairness obligations in prior tenders with the government, including the tenders at issue in this action. It submits that the RFPs were scams/shams and that this is a recurring theme in military procurements in Canada. Telecore also relies on various excerpts from Treasury Board policies and codes of conduct, caselaw and various agreements and statutes on trade and procurement to argue that the Crown owned the intellectual property rights for the schematics in question and that the AGC breached its disclosure obligations and its obligations to be fair, open and transparent in the procurement process. The alleged breaches extend to the failure to include a SOW in each of the RFPs without having received a national security exemption. Telecore argues that the omission of drawings and specifications in the RPFs breached implied disclosure rules and that the AGC preferred the manufacturer. Telecore also points to various emails and statements made during examinations for discovery in support of its allegations that the AGC admitted there was a SOW written in the 1990s for the items in question and that the AGC had generic diagrams, contrary to their alleged previous denials that these documents existed.
Telecore’s submissions and the manner in which it put forward its evidence, in particular by relying on short excerpts from a collage of documents, statutes and agreements, was somewhat confusing. Mr. O’Regan did his best as a self-represented litigant but it is apparent that much more than one hour was required to properly explain Telecore’s position and go through all of the evidence.
Although the AGC raises strong limitation period defences in respect of the allegations made in respect of RFP 1, the AGC concedes that the Court has not yet applied issue estoppel to CITT decisions. In addition, those legal arguments would not dispose of the claims for RFPs 2 and 3 which will require the Court to review the RFPs, the applicable legislation and caselaw and consider the alleged omissions, breaches and misstatements. Furthermore, and although much more information is needed to make a determination, there also appears to be some evidence that the AGC did not disclose some documents that may be found to be relevant to the RFPs.
Telecore alleges that Associate Justice Fortier previously found that its claim had merit and needed to go to trial. I reviewed Associate Justice Fortier’s endorsement dated August 14, 2023. Contrary to Telecore’s submissions, Associate Justice Fortier did not make any findings on the merit. She simply denied the AGC’s request to bring a summary judgment on the basis that the issues involved in this litigation were complex, the record was voluminous, there were issues of credibility that would likely require viva voce evidence and the proposed motion had the potential of being long and expensive.
I have come to the same conclusion as Associate Justice Fortier that the issues in this action are complex and that the allegations made raise issues of credibility that can only be properly determined at trial. Telecore pleads that the AGC acted fraudulently and in bad faith as a result of alleged concealment of available disclosure. Telecore alleges that the action raises questions of public interest because the AGC’s actions jeopardize the integrity of the procurement process. It is not possible for me to make any determinations on the merits based on the limited evidence and submissions before me on this 2-hour motion.
However, and while I think this will be a very challenging case for Telecore to advance because of the nature of its allegations, in reviewing the pleadings and considering the evidence submitted on this motion, I do not find that the claim is frivolous or vexatious or plainly devoid of any merit.
Delay
Both parties allege that the other is responsible for various delays throughout the litigation and they have produced extensive chronologies in their materials in support of their position. In my view, those chronologies demonstrate that each party was responsible for delays at various intervals in the litigation. However, what concerns me today is whether there was an unreasonable delay by the AGC in bringing this motion for security for costs.
Motions for security for costs should be brought promptly after the defendant learns that it has a reasonable basis for bringing the motion. There is no hard and fast rule on the timing of these motions within the procedural history of an action and each case will turn on its own facts regarding the appropriate timing of the motion (Shuter et al. v. Toronto Dominion Bank et al. at paras 105-107).
Delay in bringing the motion is not in and of itself the determining factor. Courts will consider the explanation for the delay and look for evidence of how the plaintiff may have acted differently if they had been aware that such a motion would be brought at some point in the action (Shuter at paras 101-104). If a plaintiff establishes prejudice from the delay, security for costs should not be ordered. However, even in the absence of prejudice caused by the delay in bringing the motion, the failure of the defendant to explain the delay can still be fatal to the motion ([Pelz v. Anderson, 2006)).
Telecore submits that the AGC has inordinately delayed the proceedings from the outset of the action and that this delay presumes prejudice to Telecore. Telecore submits that this motion should have been brought immediately after the close of pleadings and that if the AGC had done so, Telecore would have had access to funds and assets to post security. In particular, after the original Statement of claim was issued, Telecore had approximately $52,000 in its bank account. In August 2019, Telecore had $30,000 in its bank account. Mr. O’Regan also relies on the alleged equity of approximately $185,000 in his condominium as well as over $40,000 of available credit. Telecore also submits that it has been prejudiced by the AGC’s delay in bringing this motion as it has invested considerable time and expense in this action including payment of approximately $7,500 in cost awards.
The AGC denies that it delayed bringing this motion and takes the position that it was reasonable to bring this motion “after making efforts to resolve the action without a trial” including by attempting to bring a summary judgment motion in August 2023 and attempting mediation in January 2024. The AGC submits that it had no exposure to Telecore’s operations and that it had no reason to believe that Telecore wasn’t an active business until it started making inquiries in April 2024 and started pressing Telecore for information in the Fall of 2024. The AGC also submits that it acted reasonably by seeking Telecore’s consent to post security to avoid this motion. The AGC takes the position that Telecore has not established that the timing of the motion would have made a difference and that any prejudice arising from delay is mitigated by the fact that it is only seeking costs on a prospective basis (2455993 Ontario Inc. v. Solace Is Comfort Inc., 2024 ONSC 6930 at para 20).
I am not satisfied with the AGC’s explanation in waiting until late-April 2024 to bring this motion.
First, the AGC admits that it became aware of Telecore’s business model at discoveries which were held back in November 2019. This included becoming aware that Telecore had no inventory, no employees, that it only acted as an intermediary to procure items and that Mr. O’Regan was its sole shareholder. In addition, as Telecore’s claim for damages includes loss of goodwill and loss of opportunity, it is surprising that discoveries on damages did not cover ground on Telecore’s revenues. In any event, there were red flags raised at discovery in respect of the sufficiency of Telecore’s assets, which the AGC relies upon in support of the first part of the test on this motion. Despite the fact that the AGC was aware of those indicia since November 2019, it chose not to make any further inquiries or conduct further searches until the Spring and Fall of 2024.
Second, there were further indicia that arose after discoveries regarding Telecore’s potential inability to pay costs which the AGC continued to ignore. In particular, the AGC became aware of Telecore’s new address for service in September 2022 when its amended claim was delivered. A google search at that time would have revealed that this was an address for subsidized housing. Despite all this information becoming available, it is difficult to understand why a corporate profile was not pulled until April 2024 and/or why further inquiries were not made.
Third, if the AGC’s position is that it was waiting to exhaust its attempts to resolve the action by bringing a motion for summary judgment and attending at mediation, presumably to minimize its costs in the action, why did it wait until 2023 to bring the request for summary judgment and until January 2024 to attend mediation (as ordered by Associate Justice Fortier)? In any event, when the summary judgment request was denied, it is puzzling why the AGC did not then turn its mind to the matter of costs seeing as it would have no choice but to proceed to trial to have the matter determined.
Fourth, although Telecore is not correct that the motion needed to be brought at the close of pleadings or that it is subject to a two-year limitation period, there is evidence to suggest that if the AGC had moved sooner, Telecore may have been in a position to satisfy the AGC’s original request for security in the amount of $60,000.
Although I am not prepared to find that the AGC is using this motion as a tactic to avoid trial, there is something that does not sit quite right with me regarding the AGC’s explanation in view of the number of red flags in this matter that ought to have prompted it to make further inquiries regarding Telecore’s ability to pay costs. The AGC is a sophisticated party. It ought to have been clear to it that Mr. O’Regan was both professionally and personally highly invested in this action. Knowing that Telecore was self-represented and that Mr. O’Regan was Telecore’s only employee, the AGC should, at a minimum, have flagged its intention to potentially bring this motion at a much earlier stage so that the motion could be determined, and so Mr. O’Regan could decide whether or not to continue to invest his and Telecore’s efforts in this action, including the payment of the costs awards resulting from the interim motions.
In the circumstances, it is difficult to accept the AGC’s explanation for the delay in bringing this motion. The bottom line is that the AGC was content to pursue the action and chose not to make any inquiries regarding the recoverability of its costs until 2024, six years after the action was commenced. The majority of the information highlighting Telecore’s inability to pay costs was available to the AGC by the time of discoveries, or by 2022 at the latest. Significantly, the AGC chose not to make any inquiries until the eve of the deadline to set the action down for trial as ordered by Associate Justice Fortier nor did it signal the possibility of such a motion until after Telecore’s first attempt to file a Trial record.
In my view, it would be quite unfair to now prevent the trial from happening over a request for security that came out of nowhere, after over six years of protracted litigation. At this stage of the action, Telecore is quite rightfully entitled to expect that its matter will proceed to trial.
While I recognize that if the AGC is successful at trial, it will likely not be able to recover its costs—which are funded from the public purse—in the overall circumstances of this case, the AGC’s delay in bringing this motion tips the scale of justness against an award security for costs.
The motion is dismissed. There shall be no costs payable on this motion.
Date: April 22, 2025
Associate Justice Perron