Toronto-Dominion Bank v. Suitel Canada Executive Suites., 2011 ABQB 519

Court of Queen ’ s Bench of Alberta Citation: Toronto-Dominion Bank v.

Suitel Canada Executive Suites., 2011 ABQB 519 Date: 20110817 Docket: 0703 01735 Registry: Edmonton Between: Toronto-Dominion Bank Plaintiff - and - Suitel Canada Executive Suites Corporation, Executive Loft Inc., Dan White, John Collins, 1041104 Alberta Ltd., Emilio Valerio, 1057029 Alberta Ltd., Malcolm Robert MacKinnon, Malcolm Robert MacKinnon Professional Corporation, Brian McGlashan Professional Corporation, Malcolm Robert MacKinnon Professional Corporation and Brian McGlashan Professional Corporation Carrying on Business under the Name of McGlashan & MacKinnon, and Worthington Properties Inc.

Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Keith D. Yamauchi _______________________________________________________ I. Introduction [ 1 ] This Court is case managing this matter. The Toronto-Dominion Bank [“TD Bank”] brought an application before this Court in which it sought the following relief: (

a) a declaration that the Respondent Emilio Valerio ["Valerio"] is in civil contempt of the court; (

b) striking Valerio’s statement of defence; and (

c) further and in the alternative, awarding the TD Bank security for costs as against Valerio.

For the reasons that follow, the only issue that this Court addresses in this decision is TD Bank’s request for an order for security for costs against Valerio. II. Background [ 2 ] As one can see from the style of cause, there are numerous parties involved in this action, many of whom are represented by separate counsel. This Court heard an application to consolidate this action with an action that the Bank of Montreal commenced involving a similar cause of action and many of the same parties. This Court did not consolidate the actions.

Rather, it ordered that they be heard consecutively, but that the parties may be present at, and may use the results from, the questioning of parties opposite. Thus, coordination of questioning is not a simple matter of coordination of the schedules of one party and its counsel. [ 3 ] It appears to this Court that there has been one party who has taken the lead in the coordination of the questioning of a particular person. In this case, the solicitors for the TD Bank, Field LLP, have taken the lead in the coordination of Valerio’s questioning.

Pursuant to this objective, at a case management meeting which took place on October 8, 2009, this Court directed that the first round of questioning (formerly known as examination for discovery) of Valerio for up to two days take place before January 31, 2010. [ 4 ] To comply with this direction, TD Bank’s lawyers sent Valerio’s lawyers letters dated November 9, 2009, November 17, 2009, and November 27, 2009, asking for dates of Valerio’s availability for his questioning. Valerio’s lawyers responded on December 4, 2011, indicating that Valerio was available for questioning during the week of January 25-29, 2010.

Subsequent correspondence was exchanged between those lawyers relating to the scheduling of Valerio's questioning for January 25 and 26, 2010. [ 5 ] On December 18, 2009, Valerio’s lawyers sent TD Bank’s lawyers a letter indicating that Valerio resided in the Dominican Republic and had made plans to travel to Edmonton, arriving on January 25, 2010.

Valerio’s lawyers subsequently wrote to TD Bank’s lawyers advising that Valerio's travel plans would not allow his questioning to commence on January 25, 2010. [ 6 ] Bank of Montreal’s lawyers questioned Valerio for one-full day on January 26, 2010. [ 7 ] At a case management meeting which took place on April 26, 2010, this Court directed that a second round of questioning of Valerio for up to two days take place before August 31, 2010.

This Court further directed that counsel provide each other their dates of availability by no later than May 7, 2010. [ 8 ] On May 18, 2010, TD Bank’s lawyers sent a letter to all counsel involved in this Action advising them that Valerio’s solicitors were having difficulty obtaining from Valerio dates for questioning, and for counsel to provide available dates as soon as possible as the deadline that this Court set for providing the dates for Valerio’s questioning had passed. [ 9 ] On July 15, 2010, TD Bank’s lawyers sent an email to Valerio’s lawyers asking them if they had been able to reach Valerio to obtain dates for questioning.

Valerio’s lawyers provided no response to TD Bank’s lawyers from July 15, 2010, until July 29, 2010. [ 10 ] On July 29, 2010, TD Bank’s lawyers sent a letter to all counsel involved in this Action advising, among other things, that Valerio’s lawyers had not provided to them dates of Valerio’s availability, as required by this Court’s direction.

On August 6, 2010, August 10, 2010, August 13, 2010, August 19, 2010, and September 8, 2010, TD Bank’s lawyers wrote to Valerio’s lawyers to obtain potential dates for Valerio’s questioning, and reminded Valerio’s lawyers of this Court’s direction that Valerio’s further questioning be completed by August 31, 2010. Valerio’s lawyers provided TD Bank’s lawyers with no response to any of these letters.

[ 11 ] TD Bank’s lawyers sent further letters to Valerio’s lawyers on September 27, 2010 (marked 'With Prejudice') and October 13, 2010, asking for Valerio’s availability for questioning.

On October 19, 2010, TD Bank’s lawyers confirmed to all counsel that Valerio’s questioning was scheduled for November 24, 2010. [ 12 ] On November 19, 2010, Valerio’s lawyers sent TD Bank’s lawyers a letter enclosing a Notice of Withdrawal of Lawyer of Record as Counsel for Valerio, providing Valerio’s last known address, and confirming Valerio’s attendance at TD Bank’s lawyers offices for questioning on November 24, 2010, at 10:00 a.m. [ 13 ] On November 24, 2010, Valerio failed to appear for questioning at TD Bank’s lawyers offices on November 24, 2010, between 10:00 a.m. and 11:00 a.m.

TD Bank’s lawyers obtained a Certificate of Non-Attendance confirming Valerio’s failure to appear for questioning. Valerio subsequently advised TD Bank’s lawyers, through his former lawyers, that he had slept through his alarm and that he would be available for questioning in the afternoon of November 25, 2010, and all day November 26, 2010.

TD Bank’s lawyers advised Valerio that those dates were not available. [ 14 ] On January 7, 2011, TD Bank’s lawyers wrote a letter to Valerio, delivered to his last known address, advising Valerio that he was in violation of this Court’s direction that questioning take place before August 31, 2010, and requesting his dates of availability for questioning. As of January 21, 2011, Valerio had not contacted TD Bank’s lawyers offices, and no further questioning had taken place. [ 15 ] The matter concerning Valerio’s contempt was scheduled to be heard on February 4, 2011.

Valerio retained his former counsel just prior to that date, so this Court granted an adjournment to allow counsel to become reacquainted with this matter. This matter was again set down to be heard on May 24, 2011, apparently without Valerio’s counsel’s concurrence. This matter was again adjourned to July 21, 2011. [ 16 ] Before July 21, 2011, Valerio was questioned. Thus, although TD Bank had originally asked this Court to find Valerio in contempt of this Court’s various directions, Valerio purged any such contempt through his appearance for questioning.

This does not, however, eliminate the factor of delay in any further such application. III. Security for Costs [ 17 ] This leaves before this Court the issue of whether it should grant to TD Bank security for costs as against Valerio. A. Facts [ 18 ] Valerio filed an affidavit that he swore on May 27, 2011 [the “Affidavit”], in which he responds to TD Bank’s application to seek security for costs in this matter. TD Bank has not questioned Valerio on the Affidavit. [ 19 ] In the Affidavit, Valerio deposes that he is a Canadian citizen residing in Edmonton, Alberta.

He has business interests in the Dominican Republic that require him to travel there frequently. He and his spouse own a house in the Dominican Republic. They also jointly own a condominium in Edmonton [the “Condo”]. The Affidavit also states that Valerio owns a 1/3 interest in another parcel of land in Edmonton [the “1/3 Interest”]. [ 20 ] Valerio also deposes that he owns 50% of the shares of a corporation that operates a mortgage brokerage business and a “25% interest” in a corporation that “holds” lands on which two franchise businesses operate and houses in which the franchise employees reside.

The structure of the franchise holding is slightly more complex, but nothing in this decision turns on that business structure. [ 21 ] TD Bank, on the other hand, argues that Valerio’s counsel has advised them that Valerio “resides” in the Dominican Republic and that the difficulty in setting dates for his questioning was, in part, the result of Valerio having to travel to Edmonton to attend his

questioning. As for Valerio’s joint interest in the Condo, TD Bank argues that the Condo’s equity is in the range of $64,500 to $79,000. [ 22 ] Valerio has provided this Court with no information on the value of his other corporate business interests. Thus, even though they are, indeed, Alberta corporations, their worth, for the purposes of this application, is not known. As well, he has not provided this Court with information on the value of the 1/3 Interest. B.

Legislation [ 23 ] Alberta Rules of Court r. 4.22 provides: 4.22 The Court may order a party to provide security for payment of a costs award if the Court considers it just and reasonable to do so, taking into account all of the following: (

a) whether it is likely the applicant for the order will be able to enforce an order or judgment against assets in Alberta; (

b) the ability of the respondent to the application to pay the costs award; (

c) the merits of the action in which the application is filed; (

d) whether an order to give security for payment of a costs award would unduly prejudice the respondent’s ability to continue the action; (

e) any other matter the Court considers appropriate. 4.23(1) An order to provide security for payment of a costs award must, unless the Court otherwise orders, (

a) specify the nature of the security to be provided, which may include payment into Court, (

b) require a party to whom the order is directed to provide the security no later than 2 months after the date of the order or any other time specified in the order, (

c) stay some or all applications and other proceedings in the action until the security is provided, and (

d) state that if the security is not provided in accordance with the order, as the case requires, (

i) all or part of an action is dismissed without further order, or (ii) a claim or defence is struck out.

(2) If the security is given by bond, the bond must be given to the party requiring security unless the Court otherwise orders.

(3) If the security is given by money paid into Court, the money may, by agreement of the parties, be paid out and a bond substitutedfor it.

(4) As circumstances require, the Court may (

a) increase or reduce the security required to be provided, and (

b) vary the nature of the security to be provided.

(5) An order under this rule may amend a complex case litigation plan. C. Analysis [24] This Court considered many of the principles governing the awarding of security for costs against other defendants in thisaction: Toronto-Dominion Bank v. Suitel Executive Suites Corporation, 2010 ABQB 355 [“Suitel #1"]. It does not intend to repeatthose principles in these reasons.

There are, however, principles that arise from other cases, which this Court must address when it isconsidering whether it should award security for costs in favour of TD Bank as against Valerio. [25] At the outset, it should be noted that there is nothing preventing this Court from requiring Valerio, a defendant in this action,to post security for costs. The opening words of Alberta Rules of Court r. 4.22, speak of “a party.” It is not limited to plaintiffs.

Thewording in the Alberta Rules of Court that preceded the current rules, used the word “plaintiff” when it referred to a person againstwhom an order for security for costs could be sought. The Alberta Legislature made an amendment to that rule to allow security forcosts against “any party” where the court finds it just and reasonable to do so in the circumstances. The Alberta Court of Appeal inRushton v.

Condominium Plan No. 8820668, 1998 ABCA 217, 219 A.R. 51 at 58, said that this amendment was enacted with thespecific intent to make some defendants give security. [26] This Court must, however, exercise caution when it considers whether it should make such an award, as “no party should haveto give security for costs as a condition of simply defending itself”: Toronto Dominion Bank v. Szilagyi Farms Ltd. (1998), (ON CA), 65 O.R. (2d) 433, [1988] O.J. No. 1223 at para. 21 (C.A.), citing Re Percy & Kelly Nickel, Cobalt, and ChromeIron Mining Co. (1876), 2 Ch. D. 531. 1.

Residence [27] TD Bank argues that this Court should consider ordering security for costs as against Valerio because he is not ordinarilyresident in Alberta. Accordingly, it would be more difficult for it to enforce any judgment it may obtain against him, including ajudgment for costs: 32262 B.C. Ltd. v. Besler, 1998 ABQB 210, 224 A.R. 262 at para. 11, citing Crothers v. Simpson Sears Ltd. (1988),1988 ABCA 155 , 59 Alta. L.R. (2d) 1, [1988] A.J. No. 408 (C.A.). [28] There is contradictory evidence as to where Valerio resides.

The fact that he has a joint interest in the Condo belies anallegation that he is ordinarily resident in the Dominican Republic. On the other hand, Valerio deposes that he and his spouse own ahouse in the Dominican Republic, which points to their residing in that country. We must remember that TD Bank has the onus to makeout its case under Alberta Rules of Court r. 4.22, before the burden shifts to Valerio: Hildebrandt v. Fire on the Mountain ProductionsInc., 2001 ABQB 301, 287 A.R. 363 at paras. 11 - 12 (Master). Without more evidence, this Court cannot find that Valerio is a non-resident.

2. Exigible Assets [29] TD Bank further argues that Valerio does not have sufficient exigible assets in Alberta to satisfy any judgment or costs awarda court might order against him, nor has he provided evidence of exigible assets in Alberta: Grabowski v. Bodnar, 2007 ABQB 366, 428A.R. 34 at para. 48, aff’d 2007 ABCA 312, 429 A.R. 3.

TD Bank points to the Condo, which is the only asset on which it has a value,and says that the Condo’s equity is simply not enough to satisfy any costs award, much less a judgment award. [30] Grabowski also held that the status of the respondent's equity in the one Alberta property was unclear as to value andmarketability, further commenting that a property owned and occupied jointly with a spouse represents a challenging asset against whichto seek forced sale of the undivided interest: Grabowski, citing Farley v. Alberta Hospital Association (1985), (ABKB), 60 A.R. 138, [1985] A.J. No. 860 (Q.B. Master).

Of course, we do not know the actual interest that Valerio has in the Condo, suchas whether a court would find that it is a true “joint interest.” See e.g. Christensen v. Leigh, 2009 ABQB 247, 6 Alta. L.R. (5th) 160,citing Lemoine v. Smashnuk, 2008 ABQB 193. [31] TD Bank has satisfied the onus on it to bring itself within Alberta Rules of Court r. 4.22. Thus, the evidentiary burden shifts toValerio to show that this Court should not post security for costs. Why this shift?

Valerio is the only person who knows whether there isany reason why this Court should not order him to post security for costs: Besler at para. 15; Steffanson v. Richardson Greenshields ofCanada Ltd., 1992 ABCA 299 , [1992] A.J. No. 929, 135 A.R. 55 at 56 (C.A.). [32] Valerio has provided this Court with no evidence that points to the value of the Condo, any of the corporations in which hehas an interest or the 1/3 Interest. He is the only person who has this knowledge and he has chosen not to provide it to this Court. 3.

Other Matters this Court Considers Appropriate (Delay) [33] TD Bank argues that this Court may consider Valerio’s conduct, including the numerous delays he has caused, when itconsiders whether to award security for costs against him: Bourgeois v. Dechert, 2008 ABQB 115 at paras. 40-43; Suitel #1 at paras. 10-13. [34] In Suitel #1, the overall delay caused by the respondents in that application was just one factor that this Court considered.There were many other concerns that this Court had with respect to those respondents, with the delay being just one of them: Suitel #1 atpara. 4.

This Court does not have the same concerns with Valerio. This does not, however, downplay the concerns this Court hasconcerning Valerio’s conduct. 4. Discretionary Nature of the Award [35] This Court has a discretion in determining whether it should order security for costs as against Valerio: Vlad v. EdmontonCity Police Service, 2002 ABQB 108, 306 A.R. 362 at 366.

As well, as this Court stated in Suitel #1 at para. 7, a security for costs orderis not a final order: see also Alberta Rules of Court r. 4.23 (4). [36] During the case management meeting that took place before this Court on May 24, 2011, this Court ordered that TD Bankmay place a certificate of lis pendens against Valerio’s joint interest in the Condo. That certificate of lis pendens will remain registeredon the Condo as security for costs. As well, TD Bank may place a certificate of lis pendens against Valerio’s 1/3 Interest, as additionalsecurity.

Valerio has asked this Court to allow him to post monetary security if he chooses to sell the Condo. This Court assumes that ifgiven the opportunity, Valerio would make a similar request with respect to the 1/3 Interest. Until those properties actually sell, it wouldbe premature for this Court to make that order. IV. Costs of the Within Application [37] TD Bank seeks its “thrown away” costs, or solicitor and client costs. This Court orders that Valerio immediately pay TD Bank

its “thrown away” costs in the amount of $5,000, plus TD Bank’s disbursements for the various adjourned scheduled questioning of Valerio and the two applications that led to this application. [ 38 ] As well, TD Bank shall have its costs for this application on a party and party basis. Heard on the 19 th day of July, 2011. Dated at the City of Edmonton, Alberta this 17 th day of August, 2011. K.D. Yamauchi J.C.Q.B.A. Appearances: Sandeep Dhir and A. Danielle Bourgeois Field LLP for the Plaintiff Ronald H. Haggett Kennedy Agrios LLP for the Defendant Emilio Valerio