Fred Mauldin, Dan Myers, Robert Blomberg, Theodore Landkammer, Lloyd Chelli, Stephen Yee, Marvin Cleair, Richard Hanna, Douglas Laird, Charles Ivan, Lyn White v. Athena Smith, Plaintiffs/Appellants, 2013 ONSC 4501

CITATION : Bruno Appliance and Furniture v.

Cassels Brock & Blackwell, 2013 ONSC 4501 DIVISIONAL COURT FILE NO.: 80/2013 DATE: 2013/07/04 SUPERIOR COURT OF JUSTICE – ONTARIO RE: Bruno Appliance and Furniture Inc., Plaintiff/Appellant AND: Cassels Brock & Blackwell LLP, Gregory Jack Peebles and Robert Hryniak, Defendants/Respondents AND BETWEEN: Fred Mauldin, Dan Myers, Robert Blomberg, Theodore Landkammer, Lloyd Chelli, Stephen Yee, Marvin Cleair, Richard Hanna, Douglas Laird, Charles Ivan, Lyn White and Athena Smith, Plaintiffs/Appellants AND: Cassels Brock & Blackwell LLP, Gregory Jack Peebles and Robert Hryniak, Defendants/Respondents BEFORE: Herman J.

COUNSEL: David Alderson, Jonathan A. Odumera , for the Plaintiffs/Appellants Luisa J. Ritacca , for Cassels Brock & Blackwell LLP, Defendants/Respondents Jonathan L. Rosenstein , for Gregory Jack Peebles, Defendant/Respondent HEARD: June 26, 2013 ENDORSEMENT [ 1 ] The plaintiffs seek leave to appeal the order of C. Brown J., dated November 5, 2012.

That order upheld the order of Master Glustein, the case management master, dated July 27, 2012, ordering the plaintiffs to post further security for the costs of the defendants, Cassels Brock & Blackwell LLP and Gregory Jack Peebles. [ 2 ] The plaintiffs assert that there is good reason to doubt the correctness of the order on two grounds: (

i) The judge did not properly apply the test for ordering security for costs. In particular, she conflated the “good chance of success” test with the test for

summary judgment (ii) The judge failed to define “good chance of success”, leaving the appropriate standard open to debate. [ 3 ] The plaintiffs further submit that the proposed appeal involves matters of such importance that leave to appeal should be granted. Procedural History [ 4 ] In 2007, Cassels Brock and Mr. Peebles brought motions for security for costs. Master Glustein found that the plaintiffs were non-residents without any assets in Ontario and were not impecunious. He ordered them to post security for costs. [ 5 ] In 2010, the plaintiffs brought

summary judgment motions against all the defendants. On October 22, 2010, Grace J. granted

summary judgment against Mr. Hryniak, finding that he was liable for fraud. He dismissed the

summary judgment motions against Cassels Brock and Mr. Peebles. [ 6 ] Mr. Hryniak appealed to the Court of Appeal. [ 7 ] The Court of Appeal allowed Mr. Hryniak’s appeal with respect to Bruno Appliance, but upheld the decision that Mr. Hryniak was liable to the plaintiffs in the Mauldin action. Both Mr. Hryniak and Bruno Appliance applied for and were granted leave to appeal to the Supreme Court of Canada. The appeals were heard on March 26, 2013. The decision was pending as of the date of the hearing of this motion. [ 8 ] Before the Court of Appeal rendered its decision with respect to the appeals of the

summary judgment motions, Cassels Brock and Mr. Peebles brought motions for further security for costs. On August 26, 2011, Master Glustein ordered the plaintiffs to post further security for costs. This order was appealed. [ 9 ] On April 2, 2012, Lederman J. allowed the appeal in part. He concluded that the Master had focused on the wrong test and

had assessed the merits against a benchmark that was too high. He remitted the case to the Master: “to address the factor of the merits ofthe plaintiffs’ claim using the standard of ‘a good chance of success’ and exercise his discretion accordingly”. [10] On the re-hearing of the motions, the Master concluded that the plaintiffs had failed to establish a good chance of success andexercised his discretion to award security for costs payable by the plaintiffs. [11] The plaintiffs appealed the Master’s decision.

Brown J. upheld the Master’s order. [12] The plaintiffs now seek leave to appeal from the order of Brown J. Application of “good chance of success” [13] The plaintiffs concede that they have not shown themselves to be impecunious and, as a result, whether their claim has a goodchance of success is a critical factor in deciding whether they should be required to post security for costs. [14] The judge, on appeal, determined that the Master had applied the correct test in determining that the plaintiffs had notestablished a “good chance of success”.

She concluded: The Master had regard to all of the relevant factors as identified in the jurisprudence, correctly interpreted the scope of the rehearingbased on Justice Lederman’s decision, and properly construed and applied the legal test pursuant to Justice Lederman’s decision in histhorough review on the hearing. [15] The plaintiffs submit that the judge, in upholding the decision of the Master, misapplied the “good chance of success” test andconflated it with the

summary judgment test. [16] This argument was raised with the judge at the hearing of the appeal. The judge disagreed. In her opinion, the Master hadappropriately reviewed the pleadings, the reasons of the courts in the

summary judgment matter and the evidence before him and foundthat the plaintiffs had not established a good chance of success. [17] The Divisional Court articulated the “good chance of success” factor in Zeitoun v. The Economical Insurance Group (2008), (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at para. 50, aff’d 2009 ONCA 415). Where the plaintiffs have notdemonstrated that they are impecunious, as is the case here, whether the claim has a good chance of success is a factor to take intoaccount in deciding whether it would be just to require security for costs. [18] In Cigar500.com v.

Ashton Distributors Inc., (ON SC), [2009] O.J. No. 3680 (S.C.J.), Code J. discussedthe test in Zeitoun. He noted, at para. 69, that the burden for a plaintiff who is not impecunious is high. The plaintiff must establish thatthe claim has a “good chance of success”. Furthermore, the factor is only one to be balanced with other relevant factors. [19] More recently, Master Dash in Stojanovic v.

Bulut, 2011 ONSC 874, at para. 62 articulated the “good chance of success” asfollows: This is a higher standard than “not devoid of merit” but is not as high as proving the claim on a balance of probabilities at trial orestablishing that there is no triable issue on a

summary judgment motion. [20] The Master, in the motions under consideration here, adopted the test as articulated in Stojanovic. He noted further that thetest must be higher than the plaintiff establishing a genuine issue requiring trial (at paras. 47, 51). [21] While the plaintiffs do not disagree with the test as articulated in these cases, they submit that what the Master did, and whatthe judge on appeal did when she upheld the Master, was to conflate the test with the

summary judgment test. [22] The plaintiffs pointed to two examples, which they submit illustrate their point: the receipt of funds by Cassels Brock; andmeetings attended by Mr. Peebles. [23] With respect to the first example, the Master indicated that the mere fact that money was sent to Cassels Brock to act as aconduit for funds to Mr. Hyrniak did not demonstrate a good chance of success that the plaintiffs would establish liability against CasselsBrock or Mr. Peebles. [24] With respect to the second example, the Master’s opinion was that the fact that Mr.

Peebles was present at meetings was notsufficient to establish a good chance of success at trial that the plaintiffs would prove that Mr. Peebles either participated in the allegedfraud or owed the plaintiffs a duty of care. [25] In my opinion, neither of these examples nor a review of the decision as a whole supports the conclusion that the Master failedto apply the “good chance of success” test or conflated the test with the test for

summary judgment. They also do not support aconclusion that there is reason to doubt the correctness of the order of the judge when she upheld the Master’s decision. Failure to define “good chance of success” [26] The plaintiffs also submit that there is good reason to doubt the correctness of the decision because the judge failed to define“good chance of success”. In their submission, “good chance of success” is highly ambiguous and open to serious debate.

As a result,clarification of the current law is required. [27] The judge noted, at para. 25 of her reasons, that the cases of Zeitoun and Cigar 500.com do not set out a precise test fordetermining whether the plaintiff had established a “good chance of success”. She added that this was not surprising given the “factspecific nature of the analysis”.

[ 28 ] The plaintiffs did not cite any authority for the proposition that the failure to further define or clarify a legal test or factor constitutes a reviewable error. Both the judge and the Master applied the factor that had been articulated in the cases. The judge was under no obligation to further define or articulate what was meant by “good chance of success”. [ 29 ] The judge’s failure to further define “good chance of success” beyond what had been articulated in other cases is not, in my opinion, a reason to doubt the correctness of her order.

Conclusion [ 30 ] The motion seeking leave to appeal is dismissed. There is, in my opinion, no reason to doubt the correctness of the order. There is, therefore, no need to consider whether the proposed appeal involves matters of importance warranting leave to appeal. [ 31 ] I would encourage the parties to resolve the matter of costs. If they are unable to do so, the defendants may provide written cost submissions within 14 days of the release of this decision. The plaintiffs have a further 14 days within which the respond. The submissions shall not exceed 3 pages in length, plus a costs outline. Herman J.

Date: July 4, 2013