Fields of Athenry Resort Corporation FI rst Plaintiff/ defendant by counterclaim/ FIRST RESPONDENT And: Ryan Mansion Inc. S econd Plaintiff/ SECOND RESPONDENT And: Nolan Hall Real Estate Servcies Limited Third Plaintiff DEFENDANT BY COUNTERCLAIM/ THIRD RESPONDENT And: Natasha Grey First Defendant/ FIRST APPLICANT And: The Organizers Business Solutions Limited Second Defendant/ PLAINTIFF BY COUNTERCLAIM/ SECOND APPLICANT, 2018 NLSC 215

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Fields of Athenry Resort Corporation v. Grey , 2018 NLSC 215 Date : October 26, 2018 Docket : 201801G0557 Between: Fields of Athenry Resort Corporation FI rst Plaintiff/ defendant by counterclaim/ FIRST RESPONDENT And: Ryan Mansion Inc.

S econd Plaintiff/ SECOND RESPONDENT And: Nolan Hall Real Estate Servcies Limited Third Plaintiff DEFENDANT BY COUNTERCLAIM/ THIRD RESPONDENT And: Natasha Grey First Defendant/ FIRST APPLICANT And: The Organizers Business Solutions Limited Second Defendant/ PLAINTIFF BY COUNTERCLAIM/ SECOND APPLICANT Before: Justice David B. Orsborn Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: October 23, 2018

Summary: The defendants applied for security for costs in respect of a scheduled

summary trial hearing. The plaintiffs did not pleadimpecuniosity. The record showed that the plaintiffs had failed to satisfy a number of outstanding judgments and it could be inferredthat they would not satisfy any order for costs if such an order were made against them following the

summary trial application. TheCourt ordered security for costs in the amount of $2,000. Appearances: Sheri H. Wicks Appearing on behalf of the Applicants Daniel W. Bennett Appearing on behalf of the Respondents Authorities Cited: CASES CONSIDERED: Petten v. E.Y.E. Marine Consultants, (1994), (NL SC), 120 Nfld. & P.E.I.R. 313, 373A.P.R. 313, (Nfld. S.C. (TD)); Wall v. Horn Abbot Ltd., (1999), (NS CA), 176 N.S.R. (2d) 96 (N.S.C.A.); ColesFisheries Ltd. v. Sussman, 2006 NLTD 145 RULES CONSIDERED: Rule 21, Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D REASONS FOR JUDGMENT Orsborn, J.: INTRODUCTION [1] The defendants have applied for an order for security for costs. They assert that the proceeding is frivolous and vexatious,lacks merit and that the plaintiffs are subject to a number of outstanding judgments, thus suggesting an unwillingness to pay theircreditors. [2] The plaintiffs’ claims are the subject of a

summary trial application scheduled to be heard November 8-9. The security forcosts application was filed on August 23, but was not heard until October 23. The defendants say, in essence, that faced with a claimdevoid of merit, they wish some security for payment of the costs order which, according to the defendants, will follow when they areinevitably successful in having the claims dismissed following the

summary trial. They anticipate a costs order in the vicinity of $7,600. issue [3] Should security for costs be ordered? If so, on what terms? background [4] The history of the plaintiffs’ claims is not straightforward. The plaintiffs are a group of related companies-consideredcollectively as the Nolan Hall Group. Natasha Grey is the sole director of the corporate defendant (collectively “the Organizers”). From2008-2011, the Organizers (individual or corporate or both) provided various bookkeeping and related services to the plaintiffs.

After abreak of a couple of years in the business relationship, the parties agreed in May 2013 that the Organizers would again providebookkeeping and related work for the Group. The relationship came to an end in November 2015. [5] The Organizers say that all of the paper files and a CD containing all electronic files were returned to the Group in November2015. The Group says that it did not receive the CD – apparently needed for re-creation of the Group’s financial records.

The Groupasserts that it is an implied obligation that, after cessation of the contract - and even if the original CD was delivered to and latermisplaced by the Group - the Organizers are obligated to compile a replacement electronic version of the records.

[ 6 ] On January 7, 2016, Robert Hall of the Group wrote to Ms. Grey asking for the Simply Accounting (electronic files). Ms. Grey replied the next day – in part: ---I returned everything [relating to the bookkeeping] to Mary Parsons. … You have also not paid your account to my company for a total of $7,915.77 or responded to emails advising you of the balance.

The totals outstanding are: November Invoice outstanding balance 776.80 October Invoice outstanding balance = 1,327.80 September Invoice outstanding balance = 4,811.07 … Now, two months later you seem to have misplaced items, still have not paid your bill, and now demand that I re-provide all this information again for free, whole holding back a scheduled loan payment that is totally unrelated. I think they call this extortion.

As you have decided the [rental] rebate is now linked to the relationship between our companies, and as you have decided not replay the loan as agreed, you can forward a certified cheque to me for $49,715.77, before I will even consider extracting another set of your files and/or emailing you an additional copy of the HST ledgers. … I will not be forwarding what you requested below to Jerry Taylor of Quinlan & Taylor on your behalf.

When you have the cheque ready, then contact me. … [ 7 ] There is an issue as to whether the electronic files were provided at all, and in any event, whether the Organizers (corporate or individual or both) are under a contractual obligation – said by the Group to be an implied term of the oral contract restarting the relationship in 2015 – to assemble and provide the information in electronic form when requested following termination of the relationship. (At the hearing of this application, counsel for the Organizers advised that the electronic database of the Group’s information is no longer available, having been overwritten by periodic data backups in the last 3 years.) [ 8 ] In November 2017, the Organizers started four actions in Small Claims Court against Grey and the Organizers Business Solutions Limited (“OBS Limited”). • Court File No. 0117C00856: Athenry v.

Grey and OBS Limited – Claim $9,391.80. Defences were filed on December 8, 2017 and OBS Limited counterclaimed for two outstanding invoices in the amount of $1,228.80 issued to Athenry in September and October 2015 • Court File No. 0117C00857:

Ryan Mansion Inc. v. Grey and OBS Limited – claim $5,384.87. A Defence was filed on December 8, 2017 • Court File No. 0117C00858: Nolan Hall Real Estate Services Limited v. Grey – claim $19,737.30 – A Defence was filed on December 8, 2017 • Court File No. 0117C00859: Nolan Hall Real Estate Services Limited v.

OBS Limited – claim $24,241.86 – A Defence was filed on December 8, 2017 and OBS Limited filed a counterclaim for three outstanding invoices issued to Nolan Hall in September, October and November 2015 in the total amount of $48,743. [ 9 ] The Organizers took the position – repeated in this Court – that the institution of four separate proceedings in Small Claims Court was abuse of the process of that court.

They asserted, in an application to the Small Claims Court: With respect to each of the above claims, The Applicants state that the Plaintiffs are in fact the same parties and have attempted to circumvent the limited jurisdiction of the Small Claims Divisions by starting the within matters as four separate actions. [ 10 ] They sought consolidation of the four claims on the basis of the “principles of judicial economy” (paragraph 15 of the application to the Small Claims Court) and then said: The Applicants state that, should consolidation of the four actions be permitted by the Court, the whole proceeding ought to be transferred to the General Division of the Supreme Court of Newfoundland and Labrador.

Following consolidation, the total amounts claimed by the Plaintiffs shall exceed the jurisdiction of the Small Claims Division and would require transfer where any claims above $25,000 are not abandoned.

The total amount claimed in the four actions totals $58,755.43. [ 11 ] On January 10, 2018, the Small Claims Court judge issued this order: 1) Small Claims matters 0117C00857, 0117C00859, 011C00856 and 011C00858 are consolidated; 2) the consolidated proceeding is transferred to the General Division of the Supreme Court of Newfoundland and Labrador; and 3) The Organizers Business Solutions Ltd. and Natasha Grey shall have their costs of the application. [ 12 ] This order raises the question of the structure of the proceeding in this Court.

The claims transferred from Small Claims Court were opened in this Court in one file 201801G0557. The style of cause suggests one proceeding. [ 13 ] In argument, counsel of the Organizers took the position that there was only one contract and only one plaintiff (the Group); however, when pressed, she acknowledged that the claims of each plaintiff were separate-although they may enjoy similar contractual rights – and that the matter should be adjudicated as separate claims against the defendant(

s) as indicated. [ 14 ] The record filed indicates a number of outstanding judgments against the plaintiffs: Athenry – 3 judgments - 2015-16 $107,529.72 Ryan Mansion – 1 judgment – 2012- $ 5,485.17 Nolan Hall Real Estate Services Limited – 4 judgments – 2015-16 $429,444.58 [ 15 ] Robert Hall, on behalf of the Group, deposed that the bulk of the judgment debt is owed to the Canada Revenue Agency (CRA). He blames the indebtedness on the Group’s inability to file its tax returns and HST filings, which inability in turn is due, he says, to the absence of accounting records.

A further assertion is that Grey incorrectly filed a HST return, wrongly identifying the property in question, thus attracting tax. Hall’s affidavit, at paragraphs 6 and 7: 6 That in relation to the foregoing, our only conclusion is that the Canada Revenue Agency will continue to make it difficult for the Nolan Hall group of companies and myself and Kevin Nolan to operate any business, at least until our tax returns and HST filings are up to date – we can in part understand their position on that front. That is a major reason why we commenced this claim – Ms.

Grey had our accounting and bookkeeping completed until late 2015, and in spite knowing that we did not have a copy of the electronic Simply Accounting file, she refused to provide us the same or CPA Jerry Taylor. Without the assistance of her bookkeeping files, we have not been in a position to file our tax returns and HST returns and do not wish to look to spend another $50,000 to pay someone else to do this work when it was already done. 7 That the foregoing issues noted would have possibly dealt with well over $400,000.00 in Canada Revenue Agency related debt

had we been able to utilize the bookkeeping that Ms. Grey was paid for and a reversal was obtained on the CRA HST judgment as notedabove.

As such, the current financial circumstances of the Plaintiffs herein largely hinge on the ability of the corporations to file its backannual tax returns and HST reports. [16] However, despite the recitation of the Group’s difficulties, nowhere is there any assertion of impecuniosity: that is, the Groupdoes not take the position that, if ordered to pay security for costs, it would not be able to proceed with the litigation. [17] The application is brought under Rule 21 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D. [18] The defendants rely on rule 21.01 to establish their prima facie entitlement: 21.01 The Court may order security for costs to be given in a proceeding whenever it deems it just, and without limiting the generalityof the foregoing, it may order security to be given where … (

f) upon the examination of a plaintiff it appears that there is a good reason to believe that the proceeding is frivolous and vexatious, andthat the plaintiff is not possessed of sufficient property within the jurisdiction to pay costs; [19] Green, J., as he then was, discussed this provision in Petten v. E.Y.E. Marine Consultants, (1994), (NL SC),120 Nfld. & P.E.I.R. 313, 373 A.P.R. 313, (Nfld. S.C. (TD)) at paragraph 70: This notion is reflected in Rule 21.01(

f) which allows the court to order security where: (

f) upon examination of a plaintiff it appears that there is good reason to believe that the proceeding is frivolous and vexatious, andthat the plaintiff is not possessed of sufficient property within the jurisdiction to pay costs. It is not impecuniosity itself which tips the scales, but impecuniosity and a very weak case bordering on the frivolous and vexatious. Clearly, the case does not have to be so frivolous or vexatious so as to justify an order striking out the claim under Rule 14.24(1)(b). Insuch a case there would be no need for security.

Nevertheless, even though a court is prepared to allow a case to go to trial, the moretenuous the claim, the greater will be the likelihood that a perceived inability to recover costs at the end of the day will justify an orderfor security. [20] Green.

J., went on to discuss the discretionary nature of the order and the balancing required - at paragraph 71-72: 71 The court must, both in the exercise of its general discretion or in applying sub rule (f), try to balance a desire to protect personsfrom apparently frivolous litigation and the financial consequences that may flow from that, with a desire to ensure that a person with aprima facie meritorious case not be deprived of his or her day in court simply because of impecuniosity. There generally ought not to bea financial prerequisite to access to the courts.

This is especially so where it is alleged that the parties seeking costs are in partresponsible for the plaintiffs’ financial position: United Food & Commercial Workers Union, Local 1252, Fisheries Union et al v.Cashin et al, supra, per Goodridge C.J.N. at p. 143. 72 The amount of any security ordered is in the discretion of the court having regard to all the circumstances: Rule 21.02(1).

It isonly in exceptional cases where the amount of the security will be set at an amount which will fully indemnify the other party against hisestimated costs; the usual practice is to fix the amount at about two thirds of the estimated party and party costs: See Annual Practice,1996 (London: Sweet & Maxwell) Vol. 1, p. 510. [21] Here the defendants say that: 1. The claims are so weak as to be frivolous; 2. The record indicates that the plaintiffs have a number of unsatisfied judgments against them, and; 3.

The filing of four separate proceedings in Small Claims Court in an effort to circumvent the limited jurisdiction of that Court is anabuse of process. Considering all these factors, say the defendants, it is just that the plaintiffs provide security. [22] In my view, it is not appropriate to enter into an evidence-based examination of the merits of the plaintiffs’ case when dealingwith a pre-trial application for security for costs. Unless the weakness of the case is apparent from the pleadings or unless undisputedfacts are put before the Court, an assessment of the merits of the case should await trial.

However, if other evidence – not directlyrelated to the substantive case – suggests that the proceeding is otherwise “frivolous and vexatious”, such evidence is properlyconsidered. See Wall v. Horn Abbot Ltd., (1999), (NS CA), 176 N.S.R. (2d) 96 (N.S.C.A.).

[ 23 ] I note that in Petten , Green, J.’s comment about the weakness of the claim was in the context of numerous applications, including an application for security for costs, brought on the 27th day of trial. I note further that the security eventually ordered was only for future costs. [ 24 ] I cannot conclude that, on their face, the plaintiffs’ claims are so weak as to be characterized as frivolous and vexatious.

While the establishment of an implied term in an oral contract may pose some difficulty, and while one may question a damages claim which in essence seeks, on account of an alleged failure to provide an electronic record after termination of the contract, a refund of all monies paid for all services provided over a two-year period, such questions do not make the proceeding frivolous and vexatious. [ 25 ] Nonetheless, even if an prima facie entitlement to security is not established through the operation of one of the factors enumerated in rule 21.01, is it just, after consideration of all of the circumstances, that security for costs be ordered? [ 26 ] I am not prepared to conclude that the filing of four claims in the Small Claims Court is an abuse of process.

Leaving aside the question whether concerns about the manner of proceeding in one court can be used to support the claim for security for costs in another court, I am not satisfied that the proceedings in Small Claims Court were structured only to take advantage of the limited civil jurisdiction of that court. The claims are separated by individual plaintiffs depending on to which company the Organizers’ invoice in question was directed. That is, for example, invoices directed by the Organizers to Athenry, and only those invoices, were used to support and quantify the Athenry proceeding (No. 856).

Similarly, the claims against the two Defendants are determined by whether or not the word “limited” or its equivalent was used to identify the entity sending the invoice. Thus there is some element of logic to the structure of the claims that precludes the finding of an abuse of process. [ 27 ] I note that it was the defendants’ own application to the Small Claims Court to consolidate the proceedings and transfer them to this Court that resulted in this present proceeding. The Small Claims Court is intended to provide inexpensive and timely access to justice.

Although I did not receive evidence on the point, it is at least possible that had the claims proceeded in Small Claims Court, either on an individual or consolidated or other basis, they would have been completed by now. [ 28 ] As already mentioned, the plaintiffs have not suggested that they are impecunious and cannot pay an order for security for costs. On the other hand, the defendants have presented evidence of the plaintiffs’ failure to satisfy a number of outstanding judgments, their continuing failure going back to 2012.

Again as noted, Robert Hall lays the blame for much of this failure to pay at the feet of the defendants, a position that I do not find compelling. In any event, no explanation at all has been forthcoming for the plaintiffs’ failure to pay the non-CRA judgments: • WJN Investments against Ryan Mansion – March 16, 2012 - $5,845.17 • EJ Cram Limited against Nolan Hall Real Estate Services Limited – November 26, 2015 - $8,739.50 [ 29 ] These are both judgments from Small Claims Court and include costs awards. As noted, there is no reference to these judgments in Mr.

Hall’s affidavit – no explanation as to why they remain unpaid. [ 30 ] The fact that the defendants precipitated this superior court proceeding – thus negating the plaintiffs’ choice of the Small Claims process – is a factor that operates against an exercise of my discretion to award security for costs. Similarly, advancing an argument of an abuse or process – a serious allegation – tends to discourage the exercise of discretion in the applicants’ favor when that argument is not accepted. [ 31 ] But on the other hand, there is undisputed evidence of unsatisfied judgments. While Mr.

Hall’s affidavit addresses the difficulties with CRA, he offers no explanation why the two relevantly small Small Claims judgments – one going back to 2012 – remain unpaid. Given the lack of an assertion of impetuosity, the logical inference is that Ryan Mansion and Nolan Hall Real Estate are simply refusing to pay these judgments.

This conclusion, when coupled with the fact that none of the plaintiffs is in good standing at the Registry of Companies – the last filing being in 2015 – weighs in favor of exercising my discretion to order security. [ 32 ] In my view, there is a demonstrated risk that, if successful on the

summary trial application, the defendants will not be able to recover any award of costs, not because of a demonstrated inability to pay (impecuniosity) but, rather because of a pattern of refusal to pay. conclusion [ 33 ] Considering all of the circumstances in this rather unusual case, I conclude that it is an appropriate exercise of my discretion to order that the plaintiffs post security for costs. [ 34 ] As was the case in Petten and in Coles Fisheries Ltd. v. Sussman , 2006 NLTD 145 , I am only prepared to order security for future costs, and only those anticipated for the

summary trial. The costs for preparation and filing of the

summary trial material have already been incurred. The primary claim for future costs is for a $3,400 counsel fee on the contested two-day application. A minor portion of this fee should be allocated to the defendants’ pursuit of their counterclaims. In the circumstances I consider it appropriate that an amount of $2,000 be set as security for costs. [ 35 ] Rule 21.02(2) provides that the proceeding in question is stayed until the security is provided.

Further, rule 21.02(3) provides that if the security is not provided as ordered, the proceeding may, on an ex parte application, be dismissed with costs. [ 36 ] Counsel for the defendants took the position I should order that the proceedings be dismissed in default of the provision of any ordered security. I am not prepared to do that. The discretion remains to dismiss the proceedings on default.

Although the rule contemplates that dismissal may follow an ex parte application, I would strongly advise that, in this case, should there be default and an application to dismiss the application, it be brought on notice to counsel for the plaintiffs. [ 37 ] Accordingly it is ordered that:

1. The plaintiffs provide security for costs in the amount of $2,000 by way of a cash deposit with the Court on or before 4:30 p.m., Monday November 5, 2018; 2. The defendants shall have their Column 3 costs of this Application. _____________________________ David B. Orsborn Justice