The plaintiff in a wrongful dismissal and breach of contract suit has been ordered to post $50,000 as security for legal costs by the Ontario Superior Court of Justice.
The defendant, Farm Mutual Reinsurance Plan (FMRP), sought the order under a rule which specifies that a court may order security for costs “as is just” where it appears that the plaintiff is a corporation and “there is good reason to believe” it has insufficient assets in Ontario to pay the defendant’s costs.
The plaintiff, a numbered corporation, is seeking $550,000 in damages.
Prior to 2016, FMRP had a longstanding business relationship with the plaintiff and its principals, KW and PN, dating back to the mid-1990s. The couple incorporated 2496300 Ontario Inc. (249) in December 2015 and signed a contract with FMRP in January 2016 to provide property management services at FMRP’s premises.
The contract was terminated by FMRP on Sept. 15, 2017, after which 249 initiated its lawsuit.
249 opposed FMRP’s motion for nearly $215,000 in security, arguing that FMRP delayed unreasonably in bringing the motion and further alleging that it was FMRP’s failure to pay properly upon the termination of the contract that led to 249’s financial insufficiency. Despite this, the court ruled that 249 must post the security — but $50,000, not the $215,000 FMRP sought.
Multiple factors cited
The court cited multiple factors for the amount of $50,000, including the delay by FMRP in filing the motion and comparable cases.
249 argued that it was in its present financial situation as a direct result of its status as a contractor dependent on FMRP over a long period of time and the fact it wasn’t paid reasonable notice damages as alleged.
“In short, 249 relies upon the merits of its pleaded cause of action to argue that its financial straits were ’caused'” by FMRP,” the court said. “This is a circular argument. It fails if FMRP proves its defence to the action.”
The court also chided counsel for 249 for making a bald statement about law without corroboration.
“Counsel for 249 argued in their factum that no court has awarded security for costs in wrongful dismissal actions with allegations that the plaintiff is a dependent contractor,” it said.
“(They) also stated in oral argument that FMRP required that 249 be created as a condition of contracting with (KW) and (PN). She retracted that statement when she could give no proof for it,” the court said. “Counsel must be careful not to make uncorroborated statements to the court as otherwise they will personally lose credibility.”
The ruling also stated that the amount should be paid as follows:
- $5,000 no later than 60 days before the mandatory mediation;
- another $5,000 no later than 60 days before the pretrial conference;
- and the remaining $40,000 to be posted no later than 90 days before the trial.
In addition, 249 was ordered to pay FMRP $15,000 in partial indemnity costs for this ruling within 30 days from the date of the ruling.
For more information, see 2496300 Ontario Inc. v. Farm Mutual Reinsurance Plan Inc., 2023 ONSC 5178 (CanLII)