David Walsh v. LENORA WALSH, 2019 NLSC 167

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Walsh v. TRA Company Limited , 2019 NLSC 167 Date : September 23, 2019 Docket : 200101T1035 Between: David Walsh and LENORA WALSH Plaintiffs And: TRA Company Limited First Defendant And: Foodland Limited Second Defendant And: Sobeys Group Inc. Third Defendant AND: SOBEYS CAPITAL INCORPORATED FOURTH DEFENDANT AND: SOBEY’s LAND HOLDINGS LIMITED FIFTH DEFENDANT AND: JOSEPH GREEN SIXTH DEFENDANT Before: Justice Glen L.C. Noel

Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: August 27, 28 and 30, 2019

Summary: The Defendants' application for security for costs was dismissed with no order as to costs. The Court determined the claim was not frivolous and vexatious within the meaning of Rule 21.01(f). The Plaintiffs established theywere impecunious, and having to post security would prevent them from proceeding to trial on the merits of their claim. Appearances: Paul D. Dicks, Q.C. Megan S. Reynolds Appearing on behalf of the Plaintiffs Colm St. R J Seviour, Q.C. Jonathan D. Dale Appearing on behalf of the Defendants 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. (T.D.)); Zeitoun v. Economical Insurance Group (2008), (ON SCDC), 236 O.A.C. 76, 292D.L.R. (4th) 313, Wall v. Horn Abbot Ltd., 1999 NSCA 67; Fields of Athenry Resort Corporation v. Grey, 2018 NLSC 215; Walsh v.T.R.A. Co., 2016 NLTD(G) 119; Walsh v. T.R.A. Co., 2015 NLTD(G) 27; Walsh v. TRA Co., 2007 NLCA 50; Walsh v. T.R.A. CompanyLimited., 2018 NLSC 178; Talati v. Tarnoweckyj-Carr, 2011 ONSC 228; Walsh v. TRA Company Limited., 2019 NLSC 131 STATUES CONSIDERED: Evidence Act, R.S.N.L. 1990, c.

E-16 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. REASONS FOR JUDGMENT NOEL, J.: OVERVIEW [1] The Defendants applied for an order that the Plaintiffs post security for costs pursuant to Rule 21 of the Rules of the SupremeCourt, 1986, S.N.L. 1986, c. 42, Sch. D.

Initially the relief sought was security for $221,673, representing two-thirds of the Defendants’estimated party and party costs on Column 3 for a 5-week trial.[1] [2] The Defendants assert the action is frivolous and vexatious within the meaning of Rule 21.01(f), and that the Plaintiffs are notpossessed of sufficient property within the Province to pay costs. They also contend it is otherwise just to order security for costs. Theypoint to the way the Plaintiffs have conducted the litigation.

In particular, the parties confirmed readiness for trial in September 2016,exchanged trial-ready expert reports, and appeared for the commencement of the trial on October 1, 2018. Since then the Plaintiffsretained new counsel and have taken further procedural steps. [3] In response to the application, the Plaintiffs filed an Affidavit of David Walsh (“Walsh”). The Affidavit and cross-examination

of Walsh confirms the Plaintiffs have no real property or any amount of savings, and after monthly financial obligations and expenses,are effectively impecunious. [4] To require the Plaintiffs to post security at this late stage in the proceedings would likely prevent or seriously impede theability of the Plaintiffs to continue with this action. [5] I have concluded that the action is not frivolous and vexatious. The Plaintiffs are entitled to have the merits of their claimadjudicated upon at trial, without the financial burden of having to post security for costs.

Issue [6] Should the Court grant an order for security for costs, and what are factors for consideration? Analysis Meaning of “Frivolous and Vexatious” and Evidentiary Threshold [7] Rule 21.01 gives the Court authority to order security for costs “whenever it deems it just.” Rule 21.01(

f) specifically permitsan order for security where, “there is a good reason to believe that the proceeding is frivolous and vexatious, and that the plaintiff is notpossessed of sufficient property within the jurisdiction to pay costs.” [8] I accept the Defendants’ submission that a “frivolous and vexatious” claim for the purpose of Rule 21.01(

f) is something lessthan would be necessary in order to strike a claim. As Green, J. stated 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. (T.D.)) at paragraph 70: … 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). …the more tenuous the claim, the greater will be the likelihood that a perceived inability to recover costs at the end of the day will justifyan order for security. [9] Zeitoun v.

Economical Insurance Group (2008), (ON SCDC), 236 O.A.C. 76, 292 D.L.R. (4th) 313 heldat paragraph 49: “Where impecuniosity is shown, the plaintiff needs only to demonstrate that the claim is not plainly devoid of merit.” Itwas pointed out this is a very low evidentiary threshold. [10] Cromwell, J.A. (as he then was) for the Nova Scotia Court of Appeal in Wall v.

Horn Abbot Ltd., 1999 NSCA 67 at paragraph83 concluded: …Where the order for security will prevent the plaintiff from proceeding with the claim, the order should be made only where the claimobviously has no merit, bearing in mind the difficulties of making that assessment at the interlocutory stage. [11] I note Orsborn, J. more recently in Fields of Athenry Resort Corporation v.

Grey, 2018 NLSC 215 at paragraph 22 stated, “it isnot appropriate to enter into an evidence-based examination of the merits of the plaintiffs' case when dealing with a pre-trial applicationfor security for costs.” An assessment of the merits of the case should await trial. [12] Orsborn, J., relying upon Wall, recognized if other evidence – not directly related to the substantive case – suggests that theproceeding is otherwise “frivolous and vexatious”, such evidence can properly be considered.

Cromwell, J.A. in Wall at paragraph 91was able to conclude, on the material before the court, that the merits of the plaintiff’s case were weak. Defendants’ Assertions in Support of a Frivolous and Vexatious Claim [13] The Defendants assert the Plaintiffs’ claim is frivolous and vexatious because of three significant legal and evidentiary hurdles:(

a) limitations of actions; (

b) inability to recover corporate losses; and (

c) evidentiary issues in light of the Sixth Defendant’s death. [14] I conclude each of the three identified issues should await trial. [15] Firstly, I am not going to revisit and conduct another evidentiary analysis of the limitations of action issue, when the Defendantsalready brought a

summary trial application on that very issue. In her decision on the application (Walsh v. T.R.A. Co., 2016 NLTD(G)119), McGrath, J. concluded at paragraph 142: However, with respect to the issue of when the Plaintiffs knew or ought to have known of their cause of action, I am unable on the wholeof the evidence before me on this application to find the facts necessary to decide that issue. I also find that it would be inappropriate andotherwise unjust to decide the issue on this

summary trial application. [16] It would likewise be inappropriate and unjust for me to reopen and enter into a further evidence-based examination on themerits of the limitation defence prior to trial. [17] It is equally inappropriate on this application to deal with the issue of the Plaintiffs’ inability to recover corporate losses. Whalen, C.J., in his decision on the Defendants’ application to strike a portion of the Further Amended Statement of Claim (Walsh v.T.R.A.

Co., 2015 NLTD(G) 27) at paragraph 41 stated: … To preclude the Plaintiffs from bringing an action against Defendants for the reduced value of the shares would, therefore, have leftthe Defendants potentially unaccountable for their alleged wrongful act. In fact, T.R.A. Company Limited would actually benefit from ittwice: once in failing to pass on the pricing benefits contracted for; and once in obtaining a potentially viable Corporation at a reduced

cost. For this reason, I find it is possible that these facts could lead a Judge of this Court to find that to refuse the Plaintiffs' claim against the Defendants for the losses of the Corporations on the basis they are separate entities would be a result "too flagrantly opposed to justice". [ 18 ] The factual and legal determination of the Plaintiffs’ ability or inability to recover corporate losses is an issue for trial. [ 19 ] Further, in regard to the damages the Plaintiffs are claiming, our Court of Appeal ( Walsh v.

TRA Co ., 2007 NLCA 50 ) pointed out the Plaintiffs have alleged a special relationship, misrepresentation arising out of that relationship, and reliance on those misrepresentations. Consequently, they claim they have personally suffered damages. It was noted at paragraph 25: …Whether they will be able to lead evidence to demonstrate such a personal relationship, in addition to or as opposed to a corporate relationship between the Walsh Companies on the one hand and the Sobey Companies and Green on the other hand, must await trial of the issues.

They are not to be precluded from having the opportunity to establish such a relationship, and presenting their argument as to entitlement at law , by the court anticipating that a Foss v. Harbottle defence will be presented and will be successful. [emphasis added] [ 20 ] Butler, J. in her bifurcation decision ( Walsh v. T.R.A. Company Limited ., 2018 NLSC 178 at para. 17 identified the issues to be determined at trial: (

a) the relationship between the Plaintiffs and the Defendants; (

b) what representations (if any) were made to the Plaintiffs by the Defendants; (

c) if any of the representations made were made negligently or fraudulently; (

d) what reliance (if any) was made by the Plaintiffs on the representations made; (

e) whether the Sixth Defendant owed the Plaintiffs a duty of care, and if so, whether it was breached by misrepresentations made; (

f) when the Plaintiffs knew or ought to have known of their cause of action against the Defendants and if their actions are statute barred; and (

g) whether the Plaintiffs have a right to maintain a derivative action against the Defendants in their capacity as shareholders of the corporations which owned, operated and sold the two supermarkets. [ 21 ] Quite simply, the claim is not a very weak case bordering on the frivolous and vexatious or one plainly devoid of merit.

To the contrary, there are serious factual allegations to be determined on all the evidence at trial and what, if any, entitlement at law Plaintiffs may have. [ 22 ] As for the third hurdle the Defendants identified, there is no basis for the Defendants’ submission that the claim is tenuous because Joseph Green, the Sixth Defendant has passed away. Whether the Plaintiffs can satisfy

Section 16 of the Evidence Act , R.S.N.L. 1990, c. E-16 and produce corroborating material evidence in support of their version of the alleged representations is clearly an evidentiary issue for trial. The Defendants submit the late Joseph Green’s discovery examination demonstrates the tenuous nature of the claim. I am not prepared to make any determination on this issue without the Plaintiffs having the full opportunity at trial to present their own and corroborating evidence.

Impecuniosity [ 23 ] As set out in the authorities cited, and in particular paragraphs 45 & 46 of Zeitoun , provided the Plaintiffs are able to show the claim is not clearly devoid of merit, impecuniosity may be a persuasive factor in favor of no order for security. Where the Plaintiffs seek to rely on impecuniosity, the onus falls on them to show it on a balance of probabilities. [ 24 ] The Plaintiffs do not own any real estate and they live with their adult son. They are in their 70s and their only savings is a bank account with approximately $2,000. Mr. Walsh works 42 hours per week as a security guard. Mrs.

Walsh has no employment income. They both receive CPP and OAS Benefits. After they pay their debts and expenses, they have just over $1,000 per month in disposal income. From that, they have to cover vehicle maintenance on a 2007 Jeep Compass that is in need of repairs, other miscellaneous expenses, and make purchases for special occasions like birthdays and Christmas for four children and two grandchildren. They incurred significant expenses over the past eight years supporting their son, who has brain cancer.

He had has had a recent relapse and further expenses will likely be incurred supporting him. [ 25 ] They have incurred nearly $60,000 in legal fees and disbursements in this 18-year old action with the Defendants. Their current counsel has taken the claim on a contingency fee basis, as they cannot afford to fund the ongoing cost of the litigation.

[ 26 ] I find the Plaintiffs are impecunious, and having to post security would likely prevent them from proceeding at trial on the merits on their action. “Stifling a possibly meritorious claim”, as per Wall at paragraph 83, would be a great injustice. [ 27 ] The Defendants further submit impecuniosity means an inability to raise sufficient funds for the litigation, including the exposure to costs liability, as per paragraph 8 of Talati v. Tarnoweckyj-Carr , 2011 ONSC 228 . [ 28 ] They argue the ability of the Plaintiffs to raise funds includes an obligation to seek third party litigation financing.

The Plaintiffs confirmed they have not sought such funding for the litigation. The Defendants have not put before the Court any authority to establish an obligation on an otherwise impecunious plaintiff to attempt to seek out third party litigation financing in order for the Court to be fully satisfied the Plaintiffs are impecunious. In the absence of authority, I am not prepared to put that obligation on the Plaintiffs and their counsel at this late stage in the proceedings. The matter is due to proceed to trial in the spring 2020.

Whether it is Otherwise Just to Require Security [ 29 ] There is no otherwise just reason for requiring security. [ 30 ] The Defendants point to recent developments weighing in favor of security. The parties confirmed readiness for trial in September 2016. New counsel (not the current counsel for the Plaintiffs) brought an unsuccessful bifurcation application, after counsel who had represented the Plaintiffs for 12 years withdrew. While the Plaintiffs were self-represented, they indicated intention to proceed with the trial on October 1, 2018. The trial did not proceed due to Mr.

Walsh’s medical condition at the time. Subsequently, current counsel for the Plaintiffs brought an application for a jury trial that I denied ( Walsh v. TRA Company Limited ., 2019 NLSC 131 ), and an application to further amend the pleadings, that was subsequently withdrawn. [2] The Plaintiffs served Interrogatories, which the Defendants answered. [ 31 ] Nothing in what has occurred since readiness was certified justifies an order for security for costs, but it does go to costs in this application.

Costs [ 32 ] It was reasonable for the Defendants to have brought the application when they did in light of the uncertainty as to where the litigation might take them. The draft Bill of Costs attached to their application indicated the Defendants have expended over $100,000 to date in expert reports. They have also expended considerable legal fees on the proceedings since the Plaintiffs indicated their readiness for trial. [ 33 ] Even though this application has not been successful, I am exercising my discretion under Rule 55.05 to make no order as to costs.

Disposition and Order [ 34 ] The Defendants’ Application for the Plaintiffs to post security for costs is dismissed, and there shall be no order as to costs. _____________________________ Glen L. C. Noel Justice [1] In oral submissions, counsel for the Defendants indicated the Defendants were limiting their relief to costs going forward in preparation for and attendance at trial and not for costs already incurred.