2011 ONSC 5669, 2011 ONSC 5669

CITATION: 1310210 Ontario Inc. v. 1394918 Ontario Ltd. et al, 2011 ONSC 5669 COURT FILE NO.: 07-cv038850 HEARD: September 27, 2011 SUPERIOR COURT OF JUSTICE - ONTARIO RE: 1310210 Ontario Inc. v. 1394918 Ontario Inc. et al BEFORE: MASTER ROGER COUNSEL: Ronald Petersen for Plaintiff/Responding Party 1310210 Ontario Inc.

Ph: (613) 232-7171 Fax: (613) 231-3191 Arthur Cogan for Defendants/Moving Parties Quex Property Corporation and Raymond Stern Ph: (613) 237-8000 Fax: (613) 237-4906 Jay Hooper for the Defendant/Moving Party Nathalie Stern c.o.b. as Powerspeech Ph: (613) 237-0520 Fax: (613) 237-3163 Peter Mantas for Defendant/Moving Party 1394918 Ontario LTD. Ph: (613) 237-1733 Fax: (866) 805-3942 E N D O R S E M E N T 1. This motion is brought by the Defendants seeking an order for security for costs under Rule 56.01(

d) of the Rules of CivilProcedure. Other relief sought in the notice of motion dealing with undertakings and objections at examinations for discovery was notpursued. Background information 2. For purposes of this endorsement, suffice to indicate that the Plaintiff sues the Defendants seeking $750,000 in damages foroppression and conspiracy and $250,000 for punitive damages.

The Plaintiff alleges a conspiracy to perform a wrongful act, thepredominant purpose of which was to injure the Plaintiff by depriving it of any or substantially all of an award of costs made in aprevious action against the Defendant 1394918 Ontario Ltd (the previous action). 3. In the previous action, 1394918 Ontario Ltd. sued 1310210 Ontario Inc. for damages flowing from an alleged failure to complete areal estate transaction for the purchase of apartment buildings in Ottawa. In the course of the previous action, 1310210 brought a motionseeking, amongst other relief,

summary judgment or, alternatively, security for costs. By way of cross motion, the plaintiff 1394918(who is one of the defendants in this action) sought an order adding Raymond Stern as a party plaintiff. The decision on that motion can be found at 2001 O.J. No. 334 and the appeal at (ON CA), 2002 57 O.R. (3rd) 607. Essentially, the court dismissedthe motion for

summary judgment, did not add Stern as a party and ordered security for costs on a partial indemnity basis. The reasonsfor decision on the motion indicate that 1310210 argued that Raymond Stern should not be added as a party as he had contracted out ofhis personal liability. They also indicate that 1310210 rejected an undertaking that Raymond Stern pay costs that may be ordered to bepaid to 1310210.The matter later proceeded to trial which resulted in the action being dismissed with costs payable to the defendant

1310210 in the amount of $440,000. 4 . The present action seeks to recover the balance owing on these costs plus other amounts against the defendants alleging that 1394918 was set up solely to maintain the previous action, described above, while shielding its principals from exposure to costs. It is alleged, in this action, that the Defendants entered into an agreement in the nature of a conspiracy to injure the Plaintiff by depriving it of its legal costs in the previous action.

This is denied by the Defendants who allege, in their respective statement of defence, that these issues have already been decided, that it was known at the time that Raymond Stern entered into the agreements for a company to be incorporated, that 1394918 attempted in the previous action to add Raymond Stern but failed and that an order for security for costs was made in the previous action on the basis that 1394918 had no assets. 5 .

On this motion, the Defendants have filed affidavits from three affiants (assistants at the offices of their respective lawyers), and the transcript of the Plaintiff’s examination for discovery. The Plaintiff cross-examined the three affiants, filed the transcripts of these three cross-examinations and did not file other evidence. Analysis 6 . I have reviewed and considered the authorities referred to me by the parties. 7 . The applicable rule on security for costs is Rule 56.01(1) (d). 8 .

The Plaintiff argues that this motion is an abuse of process and that the affidavits filed on behalf of the Defendants should be struck. 9 . The Plaintiff cross-examined the three legal assistants who swore affidavits for the Defendants on this motion. The transcripts of these cross-examinations show that the assistants do not have personal knowledge but rather relied on information and documents provided to them by the lawyers working on the matter. 10 .

In its factum, the Plaintiff makes reference to the transcript of the examination for discovery of David Houston, a representative of the Plaintiff, and points out that the Plaintiff has been in business for years, has never lost money on an investment, holds a judgment for costs (the judgment referred to above), has an account with TD Bank and, therefore, that there is no good reason to believe that the Plaintiff has insufficient assets. 11 .

This was not argued at the motion but the evidence given at the examination for discovery of the Plaintiff cannot be used by the Plaintiff in support of its position on a motion (R. 39.04(2)). 12 . I will deal with the request to strike the affidavits in three parts, to reflect the affidavits and arguments. 13 .

Firstly, in volume 1 of the Motion Record, the Defendants, via the affidavit of an assistant at the offices of the lawyers of one of the Defendants, attach a letter from the Plaintiff’s lawyers, dated August 6, 2008 and a statement of assets and liabilities of the Plaintiff’s as at August 1, 2008, without specifying the source of the information and the fact of the belief. 14 .

It is argued that attaching these documents to the affidavit is evidence of the fact that the letter was received with the statement of assets and liabilities attached to it but not evidence of the truth of the content of these documents. 15 . The statement of assets and liabilities was made Exhibit C to the examination for discovery of the Plaintiff on May 25, 2011. The Plaintiff was examined at discovery on the content of this statement. Exhibit C and the transcript of discovery were filed on this motion.

Consequently, the Court can consider Exhibit C as well as the answers at discovery by the Plaintiff’s representative to questions dealing with the statement of assets and liabilities, for example those found at pages 8 to 10 of the transcript of the Plaintiff’s examination for discovery. This evidence is properly before the Court without having to consider the contested affidavit.

16. However and in any event, these documents originate from the Plaintiff or their counsel. One would have expected conflictingevidence to have been filed if, for some reason, the source or the content of the documents was disputed. Without such evidence, thesedocuments, originating from the Plaintiff, are non contentious documents and, as such, could conveniently be attached to the affidavit ofan office assistant. This is quite different from attaching contentious notes or reports originating from third parties containing contestedfacts. 17. Master MacLeod, in Mapletoft v.

Services 2008 CarswellOnt 897, provides a useful overview of factors to be considered asguidelines as to who can swear what for purposes of a motion. 18. Secondly, in a Supplemental Motion Record, the Defendants attach three affidavits, one for each of the Defendants, sworn by a legalassistant in the offices of their respective counsel. These affidavits indicate, for each Defendant, the total amount of legal expensesincurred for fees, disbursement and HST for litigation up to date including pleadings, motions, cross-examinations, document discovery,examination for discovery and mediation.

Further, these affidavits attach a draft bill of costs for estimated amounts yet to be incurred foreach Defendant. 19. It is argued that these affidavits should be struck as the source of the deponent’s information and belief is not stated. I disagree.While it would have been preferable to indicate the source of the deponent’s information and belief, this should not, in thesecircumstances, result in these affidavits being struck. This would be too technical and rigid an

interpretation of the Rules of CivilProcedure, considering Rules 1.04(1) and (1.1). The source of the information is obvious from the context. Lawyers, from theirexperience and practice, are well positioned to easily argue that an amount(

s) claimed for costs is excessive, considering the work doneor remaining to be done. The Court, as well, can quite easily assess amounts claimed for costs and does so regularly on any such motion.Finally, it is frequently the practice to attach a bill of costs, containing such information, to a motion record without an affidavit. 20. Thirdly, in a Second Supplemental Motion Record, the Defendants attach the affidavit of an assistant sworn August 25, 2011.

In thataffidavit, the assistant attaches a memorandum prepared by a real estate clerk at the offices of one of the Defendants in which this clerkgoes through the property searches, summarizing the information and, as well, attaches various printouts of property abstracts. 21. As a starting point, none of what is contained in that affidavit is required for the disposition of this motion considering theadmissions of the Plaintiff at discovery. 22. Paragraph 2 of the August 25 affidavit is struck as it relates to the memorandum and that memorandum as well is struck.

The clerkshould have sworn the affidavit as her memo is her opinion regarding the property abstracts. The property abstracts are not struck asthese are business records with the affidavit being sufficient notice of the intention to tender these at the hearing of the motion. In anyevent, as indicated above, this is not a contentious issue (or these facts are not contested facts) considering the admissions obtained of thePlaintiff at its examination for discovery that these mortgages are not in existence today. 23.

The admissions of the Plaintiff at its examination for discovery that these mortgages are no longer in existence, when one considersExhibit C to the examination for discovery, are sufficient to satisfy me that there is good reason to believe that the Plaintiff hasinsufficient assets to pay the costs of the Defendants should such an award be made. The moving party has demonstrated that this fallswithin one of the enumerated circumstances at Rule 56.01, in the circumstances, Rule 56.01 (d). See for example: Vacation Brokers Inc.v. Woda 2002 O.J. No. 304. 24.

The onus then shifts to the Plaintiff to demonstrate either that it has sufficient assets in Ontario to meet costs or that it is impecuniousand an injustice would result if it were not allowed to proceed with the action. See for example: Chachuta v. Baillie (ON SC), 2004 69 O.R. (3rd) 175; CanLII 27934. 25. The Plaintiff did not file evidence of impecuniosity. The Plaintiff filed no affidavit on this motion. It relied on its transcript ofexamination for discovery and on cross-examination described above. None of this is sufficient to establish, at any level, that it could paya costs award. 26.

It was argued that it would not be just to award security for costs when the Defendant 1394918 has not fully paid a costs award inthe other action.

27 . Rule 56.01 does not provide for the above. Rule 56.01 provides for the reverse situation at paragraph (

c) but this is quite different. 28 . In the previous action, the security for costs issue was argued and dealt with. In the previous action, the Plaintiff proceeded to trial with the amount ordered as security for costs against a corporate defendant which they had argued, at the motion for security for cost, had no assets should it lose the action (see paragraph 34 of the decision at 2001 O.J. No. 334 ). It does not appear that the Plaintiff sought to vary the amount of security for costs ordered in previous action as they could have under R. 56.07. 29 .

In the circumstances of this case, I disagree with the argument raised above. This is a different action with different claims and the security for costs issues in the previous action have been dealt with in that action and should not be revisited here. 30 . I find that security for costs should be ordered on a partial indemnity basis. While I appreciate the seriousness of the allegations made by the Plaintiff, and while a different scale of costs may or may not be ordered at trial, in the circumstances, security for costs on a partial indemnity basis is reasonable. 31 .

This case has proceeded to date through pleadings, documentary discovery, examinations for discovery, motions, cross-examinations and mediation. I was only provided an overall number for fees and disbursements incurred to date, with no information relating to the time spent on each of these steps. This obviously makes the assessment of costs to date difficult however, considering amounts claimed by the parties as incurred to date, there is no doubt that considerable legal services have been provided.

On a go forward basis, a pre-trial is the next step, followed by trial preparation and trial which is expected to last about one week. Significant amounts were sought as security for costs which I have reduced as indicated below. 32 . I have reviewed the amounts sought to date and for upcoming events by the Defendants and have concluded that an appropriate amount for security for costs is $165,000.00, calculated as follows, and I so order: a) 1394918 Ontario Ltd.: $60,000.00;

b) Raymond Stern and Quex Property Corporation: $60,000.00;

c) Nathalie Stern c.o.b. as Powerspeech: $45,000.00. 33 . The above amounts shall be paid as follows: a. Half of the above amount ($82,500) shall be paid into court in cash or letter(

s) of credit from a bank acceptable to the Defendants prior to December 31, 2011; b. The remaining half ($82,500) shall be paid into court in cash or letter(

s) of credit from a bank acceptable to the Defendants within 60 days following the Pre-Trial Conference. 34 . The Plaintiff may not take any further step in this action until the security for costs ordered at paragraph 33 (

a) above has been paid into court. Thereafter, the Plaintiff may take any and all required steps in this action up to and including attending at the Pre-Trial Conferenc. 35 . Following the Pre-Trial Conference, the Plaintiff may not take any further step in this action until the security for costs ordered at paragraph 33 (

b) above has been paid into court. 36 . If the Plaintiff fails to pay any of the above ordered amounts, within the prescribed time, any of the Defendants may bring a motion for appropriate relief.

37 . Costs of this motion are payable, within 30 days from today, by the Plaintiff to the Defendants on a partial indemnity basis as follows:

a) To 1394918 Ontario Ltd. $10,000.00

b) To Raymond Stern and Quex Property Corporation $4,000.00

c) To Nathalie Stern c.o.b. as Powerspeech $1,750.00 38 . Partial indemnity is the appropriate scale of costs on this motion. The amounts sought for costs of this motion by each of the Defendants have been adjusted to reasonable amounts indicated above. ___________________________________ Master Pierre E. Roger Date: October 12, 2011