Ataliotis v. Assiniboine Credit Date:, 2014 MBCA 16

Citation: Ataliotis v. Assiniboine Credit Date: 20140129 Union Ltd., 2014 MBCA 16 Docket: AI 13-30-07998 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Diana M. Cameron Mr. Justice Christopher J. Mainella BETWEEN : ) R. H. Kravetsky COSTAS ATALIOTIS ) for the Appellant ) (Plaintiff) Appellant ) S. J. Blake ) for the Respondent - and - ) ) Appeal heard and THE ASSINIBOINE CREDIT ) Decision pronounced: UNION LTD. ) January 27, 2014 ) (Defendant) Respondent ) Written reasons: ) January 29, 2014 MAINELLA J.A.

Introduction and Issue [ 1 ] After hearing the appeal, the court announced the appeal was dismissed with costs and reasons to follow. These are those reasons. [ 2 ] The issue in this appeal is whether the motion judge erred in dismissing an appeal of a Master’s order pursuant to Queen’s Bench Rule 56.01 requiring the plaintiff to post security for costs in the amount of $20,000.

Background [ 3 ] The plaintiff was an investor, officer and director in three companies (Protos International Inc., Maple Leaf Distillers Inc. and Salisbury House of Canada Ltd.). [ 4 ] In 2004 to 2005 a “cheque-kiting” scheme relating to the accounts of the three companies at the Astra Credit Union Ltd., now amalgamated with the defendant, occurred. Once the scheme was revealed, Protos International Inc. and Maple Leaf Distillers Inc. were placed in receivership. [ 5 ] One of the many lawsuits that followed the cheque-kiting scheme was Mirage Consulting Ltd. et al. v.

Astra Credit Union Ltd. (12 September 2006), Winnipeg CI06-01-48615 (Man. Q.B.) (“the Mirage suit”). It was commenced on September 12, 2006, by investors in the three companies who suffered losses due to the cheque-kiting scheme. The plaintiff was added as a third party in the Mirage suit on December 5, 2008. [ 6 ] On April 29, 2011, the plaintiff commenced an action against the defendant claiming that Astra Credit Union Ltd. was responsible for the loss of his investment of over $1.5 million in the three companies because of the cheque-kiting scheme. In an

affidavit, the plaintiff explained: I considered that if the plaintiffs in the Mirage suit were entitled to sue Astra [Credit Union Ltd.] directly for their losses resulting fromthat scheme that I, too, was entitled to make such a claim.

As is also apparent from the pleadings in the Mirage suit my then lawyer didnot immediately make a counterclaim against Astra [Credit Union Ltd.] in the Mirage suit. [7] In its defence and counterclaim, the defendant claims the plaintiff had knowledge of the cheque-kiting scheme and,together with others, perpetrated a fraud against the defendant causing it a loss in excess of $4.8 million. [8] No steps were taken by the plaintiff to consolidate his action with the Mirage suit.

In May of 2012, the defendant’scounsel told the plaintiff’s counsel that the defendant’s third-party claim in the Mirage suit would be discontinued against the plaintiff,which subsequently occurred. Motion for Security for Costs [9] The plaintiff is ordinarily resident outside of Manitoba and owns no property in Manitoba. He executed an affidavit inopposition to the motion for security for costs in the City of Limassol, in the Republic of Cyprus, affirming that he resides in FortLauderdale, Florida. The extent and location of his financial assets are unknown.

Both Cyprus and Florida are not reciprocating statesunder The Reciprocal Enforcement of Judgments Act, C.C.S.M., c.

J20. [10] In his reasons for decision, the motion judge identified and collectively weighed relevant factors: the plaintiff wasoriginally part of a related action by counterclaim that was discontinued, but the plaintiff chose to commence this claim separately; theplaintiff’s residence is ordinarily outside of Manitoba and he has no assets in Manitoba or a reciprocating jurisdiction to satisfy an orderof costs if his action is dismissed; the absence of evidence of impecuniosity by the plaintiff to post security for costs; the nature of thelitigation and potential of significant costs being incurred by the defendant; and the plaintiff’s claim of total innocence in the cheque-kiting scheme was undermined by negative credibility findings made against him in a related lawsuit (Danylchuk et al. v.

Wolinsky et al.,2007 MBQB 65, 213 Man.R. (2d) 170). The motion judge stated in his decision (at para. 31): Weighing all the factors, I am of the view that it is just in this particular case that the Master’s order stand, and accordingly the appeal isdismissed. Discussion Position of Parties [11] The plaintiff says the motion judge erred in two ways. The plaintiff argues that the motion judge went too far inconsidering the merits of the plaintiff’s action. Also, the plaintiff submits the motion judge looked only at the form of his action, not itssubstance.

The plaintiff says although he was technically the plaintiff in the action, in reality his action overlapped with the Mirage suit. [12] The defendant says there is no reason to interfere with the motion judge’s exercise of discretion. Analysis [13] A decision on security for costs is a discretionary decision to which significant appellate deference is owed (see TowersLtd. v. Quinton’s Cleaners Ltd. et al., 2009 MBCA 81 at paras. 24-28, 245 Man.R. (2d) 70; Shore-Kalo v.

Kalo, 2009 MBCA 104 atpara. 2, 245 Man.R. (2d) 209). [14] The rationale for an order of security for costs was described this way by Scott C.J.M. in Franck Estate v. Webster et al.(1998), (MB CA), 129 Man.R. 87 (C.A.) (at para. 32): …. An order for security for costs should only be granted where it is essential to do so, in the interests of justice, to provide defendantswith some protection for their potential costs.

An example would be where a plaintiff, though resident in Manitoba, has virtually all hisassets located in an off-shore jurisdiction. [emphasis added] Consideration of Merits of Action [15] One of many factors a Master or motion judge is entitled to consider in exercising their discretion whether to ordersecurity for costs is the merits of a proceeding (DeBono v. Smith et al. (1989), (MB KB), 62 Man.R. (2d) 98 at paras.3-4 (Q.B.); Shore-Kalo at para. 4; Matic et al. v. Waldner et al., 2013 MBQB 134 at para. 7, 292 Man.R. (2d) 259).

[ 16 ] Consideration of the merits of a proceeding in a motion for security for costs, however, is “not [to] be used as a device to stifle an arguable claim” ( Franck at para. 28). [ 17 ] We are not satisfied that the plaintiff has demonstrated that the motion judge went so far in considering the merits of the plaintiff’s action as to stifle an arguable claim. [ 18 ] The motion judge was careful to note in his reasons that, while the finding in the related lawsuit of Danylchuk that the plaintiff had knowledge about the use of the bank accounts of the three companies at Astra Credit Union Ltd. was relevant, it did not prove the plaintiff knew about the cheque-kiting scheme so as to make his action without merit.

Relevance of the Mirage Suit [ 19 ] We are also not convinced by counsel’s argument that the plaintiff was a plaintiff only in name, not in substance. The simple reality is the plaintiff initiated the action for his own reasons; he wanted to recover his investment in the three companies from the defendant. [ 20 ] The plaintiff chose to file his action in Manitoba several years after being the subject of a third-party claim in the Mirage suit. He took no steps to consolidate the two proceedings despite ample opportunity.

While both actions do involve the cheque-kiting scheme involving accounts of the three companies at Astra Credit Union Ltd., we are not satisfied that the plaintiff’s action and the Mirage suit raise identical legal issues as to liability.

Conclusion [ 21 ] Given the tenuous connection of the plaintiff to Manitoba currently (both personally and financially) and the fact he has chosen to sue in this jurisdiction, we are satisfied that the exercise of discretion by the motion judge was just to provide the defendant with some protection for its potential costs. [ 22 ] The plaintiff has not demonstrated a reversible error. The motion judge did not misdirect himself on the law or commit any palpable and overriding errors on questions of fact or mixed fact and law.

Moreover, the decision of the motion judge cannot be said to be so clearly wrong as to amount to an injustice in the circumstances. [ 23 ] The appeal is dismissed with costs. J.A. I agree: J.A. I agree: J.A.