COURT FILE NO.: 05-CV-285434PD2
05-CV-300149PD2
DATE: 20091221
RE: Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP et al.
Mauldin v. Cassels Brock & Blackwell LLP et al.
BEFORE: Master Glustein
COUNSEL: Ruzbeh Hosseini and Natasha Bone for the plaintiffs
Luisa Ritacca for the defendant Cassels Brock & Blackwell LLP
D. H. Jack for the defendant Robert Hryrniak
HEARD: August 18 and December 16, 2009
Nature of the motion
[1] In Court File No. 05-CV-285434PD2 (the “Bruno Action”), each of the defendants Cassels Brock & Blackwell LLP (“Cassels”), and Robert Hryrniak (“Hryrniak”) (collectively, the “Moving Parties”) bring a motion for increased security for costs under Rule 56.07 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”). Cassels and Hryrniak submit that the circumstances of this case have changed and there have been costs unforeseen at the time I heard a motion for security for costs on October 17, 2007 (the “First Motion”) and ordered the plaintiffs to post security for costs by reasons dated October 25, 2007 (the “First Reasons”).
[2] Cassels and Hryrniak bring motions for the same relief in Court File No. 05-CV-300149PD2 (the “Mauldin Action”).
[3] The defendant Gregory Peebles does not seek any increased security for costs and did not appear on the motion.
[4] In my First Reasons, I held that “the defendants may seek further orders for additional security for costs prior to other steps which may be taken in this action”, and the present motion does not seek that relief. While the Moving Parties ask for orders for “additional” security for costs and rely upon Rule 56.01, it is clear that the Moving Parties are seeking “increased” security for costs. In particular:
(i) Cassels lists its grounds for the motions under the heading “increased security for costs” and relies on grounds such as “the circumstances of this case have changed and there have been costs associated with the preparation of the Affidavit of Documents and with the summary judgment motion, which were unforeseen at the time the Court ordered the plaintiffs to post security for costs in favour of the defendants” and “there is a significant gap between the security ordered and the actual expenses and in hindsight, the original request for security for costs was based on an assessment of the complexity of the progress of this case which was not realistic”;
(ii) Hryrniak relies on grounds for his motions that “it appears that the amount initially posted is insufficient to properly secure the costs of Mr. Hryrniak if the Plaintiff is unsuccessful in its action”, and “the original request for security for costs was based on an assessment of the complexity of the case, which hindsight has established was unrealistic. The case is factually complex and it has taken much more time and expense then was anticipated to respond to it thus far”;
(iii) The affidavits filed rely on the alleged unforeseen circumstances which have arisen since the First Motion; and
(iv) The Moving Parties’ submissions before the court were clear that they sought increased security for costs on these motions due to unforeseen circumstances, not additional security for costs as I permitted in the First Reasons.
[5] Consequently, on these motions, I only consider whether the Moving Parties are entitled to increased security for costs under Rule 56.07.
Analysis
(a) Applicable law
[6] On a motion to increase security for costs, the moving party has the onus of establishing that (i) there is a significant gap between the security ordered and the actual expenses; (ii) the actual expenses were not reasonably foreseeable; and (iii) the original request for security was based on an assessment of the complexity of the case which in hindsight was not realistic (Levy-Russell Ltd. v. Tecmotiv Inc., 1992 CarswellOnt 323 (S.C.J.) at paras. 7, 8; Telemax Communications Inc. v. Conquest Communications (Canada) Inc., 2006 CanLII 7033 (ON S.C.), 2006 CanLII 7033 (Ont. S.C.J. – Mast.) at para. 57).
[7] I apply the above test to the items sought by the Moving Parties for increased security for costs.
(b) Application of the law to the items sought as increased security for costs
(1) Documentary production (Hryniak and Cassels)
[8] In both actions, the Moving Parties seek increased security for costs for documentary production. Hryrniak seeks the full costs of documentary production, on the basis that no amounts were ordered in the First Reasons, and as such, all amounts for documentary production are an “increase” over the nil amount ordered.
[9] Cassels seeks the difference between the costs for documentary production sought on the First Motion and the current anticipated costs, even though no amounts were ordered in the First Reasons.
(i) Whether Hryrniak’s motion for increased security for costs for documentary production is properly before the court
[10] During the hearing, counsel for Hryrniak submitted that the costs for documentary production were not addressed at the First Motion since the parties only argued the issue of security for costs necessary to deal with the anticipated summary judgment motions. Counsel for the plaintiffs submitted that security for costs for documentary production was addressed at the First Motion.
[11] Regardless of whether no order was made for security for costs for documentary production in the First Reasons because (i) the First Motion was intended to be limited to only summary judgment motion costs (Hryrniak’s position) or (ii) the First Motion was intended to include all known steps at that time, including documentary production (the plaintiffs’ position), it is clear that costs of documentary production were raised by both Moving Parties in their draft bills of costs before the court at the First Motion and security for such costs was not ordered.
[12] It cannot be said that the full documentary production costs for which Hryrniak now seeks security were all not reasonably foreseeable. To the contrary, Hryrniak’s position is that the documentary production costs were not at issue in the First Motion, even though they were part of his draft bill of costs for the litigation. Under this approach, Hryrniak does not seek an “increase” in costs (based on unexpected events) from those sought at the First Motion, unlike the approach taken by Cassels.
[13] Hryrniak cannot seek full costs for documentary production as an “increase” since Hryrniak specifically raised those costs as a separate component of the draft bill of costs at the First Motion. Those costs were reasonably foreseeable. Consequently, I dismiss Hryniak’s motion for increased security for costs for documentary production.
[14] It is appropriate that I address the issue of Hryrniak’s entitlement to security for costs for documentary production if Hryniak brings a subsequent motion for “additional” security for costs which would be governed by Rules 56.01(1)(a) and (d).
[15] If Hryrniak is successful on his position on the subsequent motion, then Hryrniak would seek security for costs for the full amount of documentary production, and not only any increase caused by allegedly unforeseen circumstances.
(ii) Cassels’ motion for increased security for costs for documentary production
[16] Cassels submits that it is entitled to increased security for costs from the nil amount ordered at the First Motion because Cassels submits that the evidence demonstrates that such increased costs were not reasonably foreseeable and based on an assessment of the complexity of the case which in hindsight was not realistic.
[17] My comments on this argument apply equally to Hryrniak, who makes the same submissions as to reasonable foreseeability of costs and the complexity of the case. However, as I discuss above, Hryrniak’s motion is not properly brought as a motion for increased security for costs.
[18] On the evidence before me, I do not find that the actual expenses of documentary production were either reasonably foreseeable or based on an assessment of the case which was not realistic. In particular, the Moving Parties claim that costs were increased because (i) at the time of the original estimate, counsel had not delved sufficiently into the file to determine precisely how much time it would take to make documentary production, and that task has proved to be more time-consuming than originally thought and (ii) the plaintiffs made numerous requests for additional documentary productions and advanced a motion for additional documents.
[19] There is no evidence before me as to what facts came to the knowledge of counsel for the Moving Parties after the First Motion which made the task of documentary production more time-consuming than originally thought. It is not sufficient to make a bald allegation that the process was more time-consuming – there must be evidence to satisfy the court that the increased costs were not foreseeable, and arose because the case became more complex than anticipated.
[20] The Moving Parties had the plaintiffs’ pleadings, particulars, and documentary disclosure well before the First Motion and there is no evidence of any unexpected factors after the First Motion from the plaintiffs’ production that could have led to increased costs for documentary production.
[21] Further, this case was complex from the outset, and it would have been evident from the lengthy and detailed pleadings that the Moving Parties would incur significant costs in the production process. I do not find that there was any change in circumstances which rendered the production process more complex.
[22] Similarly, the fact that the Moving Parties incurred additional costs to respond to the plaintiff’s demand for additional relevant documents cannot be said to give rise to unexpected costs. In the Bruno Action, plaintiff’s counsel delivered an extensive Request to Produce, which was broad in scope and made it clear that the plaintiff was seeking significant production. The Mauldin Action is being heard in parallel with the present action and involves the same parties. Consequently, the Moving Parties were aware in both actions of the production issues between the parties, and could have foreseen both the likelihood of a dispute over production and the possibility that broad production would be required.
[23] Consequently, I do not order increased security for costs to Cassels for documentary production. As I discuss above, the Hryrniak motion for increased security for costs for documentary production is not properly brought under Rule 56.07, but if it were, I would dismiss it as well for the same reasons.
[24] My order is without prejudice to Hryrniak and Cassels seeking security for documentary production costs as “additional” security for costs under Rules 56.01(a) and (d), pursuant to my reasons discussed above.
(2) Attendances at case conferences (Hryniak)
[25] Hryrniak seeks increased security for costs for attendances at case conferences. However, these costs were not addressed in the First Reasons, and as such cannot be “increased” costs from an amount already ordered.
[26] Again, the Moving Parties can seek this relief at a motion for additional security for costs, without prejudice to the plaintiffs opposing such relief.
(3) Summary judgment motions (Hryniak and Cassels)
[27] The Moving Parties each seek increased security for costs relating to the summary judgment motions. Hryrniak seeks such increased security for costs in both the Mauldin and Bruno Actions and Cassels seeks such increased security for costs in the Mauldin Action. For the reasons discussed below, I do not order increased security for costs for the summary judgment motions.
(i) Hryniak’s requests for summary judgment motion costs he did not consider at the First Motion
[28] Hryrniak seeks security for costs for summary judgment costs he did not consider at the First Motion, such as costs of cross-examination and the hearing. However, a motion for increased security for costs cannot be used to correct errors in the calculation process made at the time of the first security for costs order. Counsel is required to consider all relevant costs to the matters at issue on a security for costs motion, and cannot use Rule 56.07 for an “increase”. The failure to consider costs is not an unforeseen change in circumstances arising from increased complexity to the litigation.
(ii) Hryniak and Cassel’s motions for increased summary judgment motion costs considered at the First Motion
[29] Hryrniak and Cassels both seek increased costs arising from unexpected complexity of the summary judgment motions. Hryniak seeks increased costs for the summary judgment motions in both the Mauldin and Bruno Actions. Cassels seeks increased costs only for the summary judgment motion in the Mauldin Action.
A. General comments
[30] In order to obtain increased security for costs, the defendants must demonstrate that actual expenses arose which were not reasonably foreseeable, and that the original request for security was based on an assessment of the complexity of the case which in hindsight was not realistic. I do not find that the evidence supports such a finding in this case.
[31] At the First Motion, the Moving Parties knew that the plaintiffs were seeking summary judgment on their entire claim. Consequently, it would have been apparent to both Cassels and Hryrniak that they would be required to expend considerable resources on preparing responding material to demonstrate that there was no genuine issue for trial. The litigation is significant, with serious allegations and damages sought in each action of $5 million, with additional damages of $10 million sought for each of punitive and exemplary damages.
[32] Defendants’ counsel was entitled to ask the court on the First Motion for all reasonable costs they would expect to incur when faced with such a serious motion and the complex allegations made against their clients. This would particularly be the case when the motion materials had not been served, and any and all issues would have been at stake in the summary judgment motions.
B. Hryniak’s motions for increased security for costs in the summary judgment motions in the Mauldin and Bruno Actions
[33] At paragraph 16 of his factum, Hryrniak relies on the submission that it is now necessary to examine all of the plaintiffs because of “very significant admissions that Mr. Mauldin has made in the evidence he has given in response to these motions”. However, from the outset, Hryniak could reasonably have been foreseen that either the plaintiffs all would have filed affidavits (in which case the cross-examinations of the plaintiffs could have been included in the costs sought on the First Motion), or that if they did not, Rule 39 cross-examinations might be required given the reliance by the plaintiffs on alleged representations by the defendants. Consequently, the need for cross-examination or Rule 39 examinations of the plaintiffs was reasonably foreseeable.
[34] Further, even if I accepted that Mauldin made the alleged admissions (which I do not decide as the plaintiffs challenge Hryrniak’s summary of some of the transcript evidence), the alleged admissions relied upon by Hryrniak do not demonstrate any increased complexity in the litigation.
[35] From the outset, Mauldin pleaded that he was the representative of the plaintiffs, and as such the knowledge of the plaintiffs obtained from Mauldin, and his conduct vis-à-vis the other plaintiffs, would be at issue. Also, issues such as how the funds were obtained or maintained prior to the investment, even if relevant to the motion (again, an issue I do not decide), demonstrate no change in complexity justifying the need to examine each of the plaintiffs, which in any event could have been considered at the First Motion.
[36] At paragraph 20 of his factum, Hryrniak submits that “the admissions made by Mr. Mauldin in his cross-examinations on this motion have given rise to questions about his own conduct, and that of Mr. Myers, with respect to the funds allegedly given to Mr. Mauldin by the other plaintiffs”. However, even if I accepted the examples provided as admissions (which I again do not decide as the plaintiffs challenge Hryrniak’s summary of some of the transcript evidence), the factors relied upon by Hryrniak do not indicate why there is any increased complexity in the litigation.
[37] Issues such as how Mauldin dealt with the funds could easily have been anticipated from the statement of claim which alleged that Mauldin was the representative of the plaintiffs, and in any event, do not add any significant degree of new complexity which would justify increased security for costs.
[38] Similarly, issues such as the alleged plagiarism of documents and the issue of whether Frontline was a dummy corporation yield only a bald allegation that increased costs are required, without any evidence as to why these issues are complex and create significant unforeseen costs. It is not sufficient to simply find a new fact that has arisen (an issue I do not decide as the plaintiffs submit that these issues could have been considered at the time of the First Motion). Evidence is required to satisfy the court of significant unforeseen costs, and Hryrniak did not produce such evidence.
[39] With respect to the Bruno Action, Hryrniak makes an additional argument that a different fraud is now at issue in the summary judgment motion than what was raised in the statement of claim at the time of the First Motion. Hryrniak submits that his “counsel was required to do a thorough investigation, review and analyze [sic] of all of the entries in Cassels trust records, and determine the actions of Cassels and Peebles in respect of those trust accounts and the authority, and lack of it, under which they proceeded”.
[40] However, in the Fresh as Amended Statement of Claim dated March 18, 2005, the plaintiffs pleaded that “Hryrniak and Peebles were engaged in a common design to improperly obtain the Plaintiff’s $1,000,000.00 (USD) investment for their own purposes and benefits”, and that Bruno was unable to obtain “information about precisely where the funds were sent” because “Cassels Brock has refused to provide this information” (see paragraphs 36 and 42 of the claim). After documentary production, Bruno was able to obtain this information.
[41] Consequently, it was not unexpected at the First Motion that Hryrniak would have to investigate the trust account documents to be produced, and address that documentation in his affidavit. There is no evidence that Bruno’s position as to how the fraud took place, obtained after both parties engaged in the foreseeable exercise of reviewing trust documents, caused any increase in costs that could not have been reasonably anticipated at the First Motion.
C. Cassels’ motion for increased security for costs in the summary judgment motion in the Mauldin Action
[42] Cassels seeks increased security for costs for the Mauldin summary judgment motion, on the basis of alleged “significant new facts and issues that were not known to Cassels Brock at the time the first order for security for costs was sought”. Unlike Hryrniak, Cassels does not submit that it seeks costs for items it did not consider (such as cross-examinations and hearing) at the First Motion.
[43] Cassels claims that the additional costs were unforeseen for two reasons. First, Cassels submits that it did not anticipate that it would have to prepare a “comprehensive responding affidavit”, since the “plaintiffs, through Mr. Mauldin, simply restated their pleading in support of their motion”. Second, Cassels relies on “various facts admitted by Mr. Mauldin at his cross-examination on May 13, 2009, which were not known at the time Cassels Brock first sought security for costs”.
[44] With respect to Cassels’ first submission, it was reasonably foreseeable that at the time of the First Motion, Cassels would have to prepare a comprehensive responding affidavit. At that time, the defendants were aware that the plaintiffs intended to bring a motion for summary judgment on their entire claim. There was no suggestion that the scope of the summary judgment motion would be limited. Given the importance of the issues involved, the significant damages sought, and the complexity of the factual and legal issues at issues, Cassels ought to have reasonably anticipated that the responding affidavit would be comprehensive.
[45] A failure to accurately assess costs for a process that was foreseeable does not give rise to a right for increased security for costs. Otherwise, counsel could simply return repeatedly to the court each time costs for an anticipated process were underestimated, rather than demonstrate unexpected events that caused the increase. Such an approach would be inconsistent with the settled case law.
[46] With respect to Cassels’ second submission, i.e. the allegedly new facts admitted by Mauldin and relied upon by Cassels at paragraph 10 of its factum, there is again no explanation as to why these alleged admissions created unexpected new costs, other than a bald allegation to that effect. Even if such facts as the plaintiffs’ previous investment opportunities, how the investment was introduced, and Mauldin’s role as a representative, were all relevant and new (submissions which are disputed by the plaintiffs), there is no evidence as to (i) how these allegations would give rise to substantial unexpected costs or (ii) changed the complexity of the case, such as to justify an increase in security for costs.
D. Conclusion on motions for increased security for costs for the summary judgment motions
[47] Consequently, for the above reasons, I dismiss the motions for increased security for costs in both actions.
(4) Impecuniosity
[48] I briefly address the issue of impecuniosity of the Mauldin plaintiffs, which arises only if either Hryrniak or Cassels is entitled to increased security for costs (which I do not accept).
[49] At the hearing I expressed concerns about whether the plaintiffs had led sufficient evidence to establish impecuniosity. In particular, I noted that on the evidence before me, “unanswered questions” remain with respect to the financial situation of the plaintiffs and it is unclear whether there has been “full financial disclosure” of all debts and liabilities (see paragraph 19 of the First Reasons). The plaintiffs’ capacity to raise funds is not fully explained, and several of the plaintiffs appear to have sufficient assets to pay the costs of unsuccessful litigation.
[50] However, it is not necessary for me to decide this issue given my order dismissing the motions for increased security for costs. I will address the impecuniosity issue if the plaintiffs rely on this argument in response to a motion from the defendants for additional security for costs. At that time, I will decide, either based on the evidence presented on this motion or on any additional material filed by the plaintiffs for that motion, whether the plaintiffs satisfy the test for impecuniosity.
Order and costs
[51] I dismiss the motions for increased security for costs. The parties submitted costs outlines for the present motion and the motion for directions which was heard prior to this motion.
[52] The Moving Parties were successful on the motion for directions. Cassels is entitled to $4,500 inclusive of GST and disbursements, and Hryrniak is entitled to $3,000, inclusive of GST and disbursements, payable by the plaintiffs.
[53] The plaintiffs in both actions are entitled to their costs of these motions, as the Moving Parties were not successful. Hryrniak’s costs for the two motions were approximately $19,500, and Cassels’ costs were significantly higher. The plaintiffs sought costs of $22,883.26, inclusive of GST and disbursements, to respond to all of the motions.
[54] Considering the complexity of the motions, the importance of the matter to the parties, and the voluminous materials filed, I find that the costs sought by the plaintiffs of $22,883.26, inclusive of GST and disbursements are reasonable. The Moving Parties are collectively required to pay these costs to the plaintiffs.
[55] All costs orders are payable within 30 days of this order. Given the above costs orders, they may be offset to the extent possible, if the parties can agree on a mechanism to do so. If no agreement can be reached, the costs orders shall each be paid separately pursuant to these reasons.
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Master Benjamin Glustein
DATE: December 21, 2009
