Li v. Li
[2016] O.J. No. 6556
2016 ONSC 7410
Court File No.: CV-09-386573
Ontario Superior Court of Justice
Master D.E. Short
Heard: November 19, 2015.
Judgment: December 16, 2016.

Counsel:
Paul Dollak, for the moving defendants.
David Marcovitch, for the responding party plaintiff.
Simon Bieber, for plaintiff's counsel in his personal capacity.

Reasons for Decision:
Access to Justice??

I Preamble:

1  This motion appears to identify a number of items which are wrong with our current litigation system. On this occasion, the defendants seek to amend their statement of defence to add a pleading that monies advanced to them by their parents were subject to a constructive trust which entitled the children to any monies they received from their parents in priority to an unsecured creditor . That alleged creditor, the plaintiff, claims he advanced the funds to the family's business over a number of years such that he is entitled to repayment from some or all of the defendants.

2  The initial claim was asserted against Fo Ling Li, and his spouse Mei Lin Cheung aka Mei Lin Li (collectively "the Parents"). The Parents (primarily Fo Ling), were involved in an import/export business for a number of years.

3  The Statement of Defence acknowledges:

In or about 1997 Fo Ling lived in Panama. He and his brother were contacted by the Plaintiff to assist in distributing merchandise in Panana. Fo Ling and his brother were fluent in Spanish and the Plaintiff could not speak Spanish and he asked for their assistance in distributing goods to retail outlets in Panama.
It was agreed that Fo Ling and his brother would from time to time accept delivery of goods from the Plaintiff on consignment for sale at various retail outlets in Panama. All funds received from the sale would be forwarded to the Plaintiff, less Fo Ling and his brother's commission. All unsold goods remained the property of the Plaintiff.

4  As well the family apparently ran a convenience store called Henry's Milk in Toronto.

5  The plaintiff now resides in New York City. In 2010 I made an order requiring him to post security for costs in this matter.

6  The plaintiff's Statement of Claim alleges that he supplied goods which were not fully paid for by the first two named defendants.

7  He appears to have trusted the couple and routinely extended the amount of credit which he had advanced to them, in exchange for an annual written acknowledgment of the then current size of the debt owed.

8  For whatever reason, the acknowledgments appear to have been subsequently denied, at least with respect to their validity after growing from $168,000 to over $650,000 (U.S.) by 2005.

9  Within two years of the last acknowledgment of debt, the plaintiff brought this action in Ontario to recover the monies he claims he is owed.

10  In his most recent affidavit, he asserts:

I am owed about $650,000.00 USD. There is a judgment against FO and MEI for that amount. FO and MEI advised me that they have no intention of paying me. They advised me that they transferred their funds and assets to their children to avoid paying me. These actions have forced me into poverty. I simply want to trace the flow of funds and assets to and from the children, to recover where I am able. ..."

11  The defendant couple were both alive when the action was started in 2010. The father, Fo Ling died in 2012. It would seem that he was the one running the business. His widow appears to have had progressively deteriorating health problems and at least at some point after his death is described as having been found "homeless" by her children.

12  In the pleading, filed on her behalf it was alleged that she has is no liability whatsoever to the plaintiff. Nevertheless, she was noted in default and a judgment was obtained against her.

13  While some discoveries of the remaining defendants have taken place, and while I am responsible for portion of the delay to date, my impression is that in the past six years, this action has generally languished.

14  As a consequence, while this matter was under reserve I spoke with counsel for the parties and extended the set down date for a further year to December 30, 2017.

II. Previous motion

15  As noted above, this matter first came before me a number of years ago, in August 2010, at which time I had to address an application for security for costs brought on behalf of the defendants.

16  My reasons in Li v. Li can be found at [2010] O.J. No. 3678; 2010 ONSC 4716; 192 A.C.W.S. (3d) 404; 2010 CarswellOnt 6402. I do not intend to quote extensively from that earlier decision but its contents and conclusions are clearly relevant to the present motion.

17  A headnote summary of that decision reads:

"The plaintiff sued two parents and four children for approximately $650,000. He contended that the parents had personally guaranteed funds advanced in the course of a business relationship. He contended that the parents advised they had transferred assets to their children to avoid payment. The plaintiff claimed the full amount from the parents plus any portion that may have been fraudulently or unlawfully transferred to the children by the parents. The children denied that any funds were advanced by the parents and sought security for costs. The plaintiff presently resided in New York City with his son. Previously, he lived in Panama, as did the defendant parents. The plaintiff deposed that he was impecunious due to the failure by the defendants to pay the amounts owed. He deposed that he had no ability to borrow or raise funds to post security for costs. He deposed that an order to post security would end the litigation. The plaintiff's son, age 28, deposed that his graduate studies were funded by $138,000 in student loans. The defendants sought security for costs in the amount of $39,000 on a partial indemnity basis, or $63,000 on a full indemnity basis.
HELD: Application allowed. The plaintiff was required to post security for costs in the amount of $7,500 in order to continue his action against the children. The plaintiff's financial records were stale-dated and heavily redacted. The combined net worth of the plaintiff and his son remained unknown. Proportionality dictated that the plaintiff ought to be able to resurrect his claim if an order for security ended his claim and he subsequently raised the funds necessary to prosecute his claim. Consequently, the security order was significantly less than the amount sought and contemplated coverage until the conclusion of discoveries."

18 Significantly the conclusion of my reasons reflects my then understanding of the plaintiff's circumstances. In part,

I wrote:

While significantly less than the quantum sought, I have determined to exercise my discretion, having regard to all the factors discussed above, to establish what I believe is a fair and just amount. Thus I am requiring the plaintiff to post cash or another form of security in the amount of $7500 if he wishes to continue the action against the Defendant Children, at this time.
In light of the plaintiff's apparent circumstances, I am not requiring the posting at this time of any security with respect to HST or disbursements.

XIII. Costs

This was a complicated motion with numerous cross examinations, interim conferences and motions together with full factums and case books. The Plaintiff's counsel sought Partial Indemnity costs of approximately $17,500. The costs of the motion sought by counsel for the Defendant Children was slightly over $14,000.
Success has been somewhat divided and it would seem disingenuous for me to award costs of the motion to be payable in a greater amount than the security I am ordering.
It seems the proportionate solution is to award costs fixed at roughly the average of two thirds of the amounts sought by each side, being $10,500. To promote the plaintiff's access to this court, I am fixing the all-in sum of $10,500 to be payable "in the cause" of the claims against the Defendant Children.

19  At that time, I determined that it appeared that the plaintiff was impecunious and, that it further appeared based on the plaintiff's pleadings that he might well have a reasonable cause of action against some of the defendants.

20  The remaining defendants now move for further security for costs on the basis of previously undisclosed information concerning the basis upon which the plaintiff's counsel is conducting this litigation.

21  Originally, the remaining defendants also sought to amend their pleading to seek a stay of the plaintiff's action. That motion was at least abandoned for the time being. However, the portion of the motion seeking to amend other provisions of the statement of defence to inter alia assert additional defenses was granted at the hearing of this motion. I will refer to the specifics of some of those amendments later in these reasons.

III. Theory of the Case

22  Over the years this action has devolved to an attempt to locate proceeds from assets of the parents which might have been available to satisfy the claims of the plaintiff Apparently a house on Clapperton Avenue was bought while the couple were alive. At least a portion of the proceeds from the sale of the milk business was used at least for a down payment on that property. I have not seen the title search to indicate what mortgage financing was on the property or how it was obtained.

23  After a number of years, the Clapperton property was sold and proceeds obtained. I am told that hundreds of pages of bank records have been produced by the defendants. However, it took an additional order for this court to obtain production of the cheque that reflected the proceeds the sale of the Clapperton house produced.

24  That cheque seems to have been deposited or drawn upon from yet another HSBC bank account. Counsel for the defendants says that where the money went is irrelevant. I do not accept that submission based on the pleadings at this point.

25  Counsel for the plaintiff acknowledges that many pages of banking information have been produced. However, he argues that the key pieces of evidence have yet to be delivered. In particular: (a) the accounts into which the mortgage and sale proceeds of Clapperton were deposited; and. (b) the accounts into which those funds were disbursed.

26  I accept the submission that the "disclosure of hundreds or thousands of pages of non-essential information does not relieve the Children of delivering essential and relevant information."

27  Either the couple had assets and spun them off to their children over a number of years in the face of what would appear to be amounts claimed as owing to the plaintiff or there was no obligation to pay the claimed amounts and they were at liberty to do what they wanted with their money.

28  In part the difficulty faced by the defendants is that their mother is now aged and may not be able to provide much assistance in defending against these claims. The children, of course, want to protect their assets and assert that they were entitled to keep the benefit of any and all monies received from their parents.

IV. Proposed Amendments

29  The amendments to the Statement of Defence that I approved at the hearing of this motion, assert that the children properly received some or all of the proceeds from the sale on the basis that it reflected payments from the Parents with respect to food and lodging expenses, etc. incurred by the children with respect to the care of their parents. Thus, they are now seeking, in the alternative, to assert a further basis for for an alleged entitlement to any of the proceeds, in priority to any claim of the plaintiff.

30  In part, the proposed amended paragraphs of the pleading read:

Fo Ling and Mei Lin state that there is no cause of action against them and request that this action be dismissed as against them, with full costs payable by the Plaintiff on a substantial indemnity basis.
Claudia Maria Li Tang, Antonio Li, Alexis Li and Christina Li are the children of Fo Ling and Mei Lin (the "Parents") "Children"). The Children have no direct knowledge of their Parents' business dealings.
The Children deny receiving, fraudulently or otherwise, assets from their Parents for the purpose of putting them beyond the reach of the Plaintiff.
The Children deny that they received any assets from the Parents beyond reasonable support given from parents to children. In fact, in the Parents' retirement the Children have supported the Parents financially.
The Children state that all real property and businesses that they have purchased and all related mortgage payments were made themselves without the benefit of any support from the Parents Fo Ling or Mei Lin.

31 The proposed pleading then sets out an overview of the alleged consideration given for any funds that may have been received by the Children:

Should this Honourable Court find that the Children received any monies from any source whatsoever traceable to the Parents in excess of the amounts they paid to the Parents for the Parents' support, despite what the Children have pleaded above, the Children say that such funds were received in consideration for:
room, board and care, including expenditures related to same, provided by Antonio Li and Claudia Li to their younger siblings Alexis Li and Cristina Li on behalf of the Parents when both Parents, for a time, lived outside of Canada;

(b). room and board provided to, first, Mei Lin, who had no independent source of income whatsoever at any material time, and then, later, to both Parents;

the Children's labour from childhood to the date that the family-operated variety store "Henry's Milk" was sold, labour for which the Children never received any wages or other financial compensation whatsoever from the Parents; and
the Children's equity in the land and premises from which Henry's Milk carried on business, as well as in the proceeds of sale of same, equity which arose out of trust principles due to their unpaid labour for the Parents over many years, including but not limited to interests rising upon constructive or resulting trusts.

32 The amended form of the pleading then outlines an argument as to why the default judgment against the Parents ought not to be binding against the Children:

The Children did not take a position in respect of the claims brought against the Parents when the Plaintiff moved for default judgment against the self-represented Parents on September 9, 2012.
The said default judgment, moreover, was obtained while Fo Ling was dying of cancer - he died, shortly after it was obtained, on October 28, 2012 -with the result that all of the defendants were preoccupied with more pressing matters of life and death while the Plaintiff was pursuing default proceedings against the Parents.
The Children state that as a result of the aforesaid facts, and as a matter of law, the said default judgment does not establish any of the facts alleged in the Statement of Claim as against them, whether or not it establishes valid liability on the part of the Parents.
On the basis of the foregoing, then, the Children state that there is no cause of action against them, or that the cause of action against them is out of time, and request that the action against them be dismissed with full costs payable by the Plaintiff on a substantial indemnity basis.

33 I have granted permission for these amendments to be made which they clearly assert a somewhat different picture of the issues in the overall dispute.

V. Earlier Understanding

34 In my earlier decision in this case, supra I outlined my approach to establishing an appropriate amount of security for costs at that time:

"XII. Tipping Point
74 Relying upon the foregoing guidance, I have elected to consider all the factors and based on the new factor of proportionality, I would also look to access to justice as the key factor.
75 The problem in this case is that, as indicated above, I believe both the plaintiff and the Defendant Children ought to be provided with an opportunity of asserting their respective positions.
76 I am assuming that the parent defendants may also be impecunious. If there was nothing else, I would allow the plaintiff's case to proceed, without his having to post security, but with a charging order against any recovery by him in the nature of a Sanderson order.
77 However, I have considered Justice Quinn's view in [Morton v. Canada (Attorney General), [2005] O.J. No. 948] as to the duty of a plaintiff seeking an indulgence: in this respect:
"[39] In considering what is "just", I expect it has been said before that a court is balancing two rights: the right of successful defendants in an action to the uneventful payment of their costs; and, the right of plaintiffs to their day in court for the trial of a meritorious action.
[40] The failure of the plaintiffs to adduce sufficient evidence of their financial status makes it just that the relief sought on the motions be granted."
78 I also am mindful of Justice Czutrin's view that the financial position of the plaintiff "is but one factor". [at 76 O.R. (3d) 748] While I do not find that a failure to disclose all such information should result in an automatic order for the relief sought, nevertheless such a failure may well tip the balance against a plaintiff.
79 Here, the plaintiff acknowledged receipt of funds from Cheung Mei Lin in 2003 and 2004. As well, his productions contained some statements for an account at Citibank N.A. during the period March 7, 2005 to February 6, 2007. It is my understanding that when, during the relevant period, the plaintiff ceased having his own bank account, he made use of his son's account. The statements are addressed to his son William K. Li and the copies produced by the plaintiff are heavily redacted.
...
87 The last statement produced is dated February 6, 2007. Again it appears there may be balances in at least four accounts at that time, but all are obliterated, save and except a $975.00 receipt for Fo Ling Li.
88 No more current statements were produced and production of such statements was refused on the cross examination of the plaintiff on his affidavit in opposition to this motion.
89 Almost three and a half year old data is quite stale in these circumstances. The son was willing to file an affidavit in support of father's position but (notwithstanding the disclosure of the extent of his outstanding student loan) the son's actual available assets, and the actual combined net worth of the father and son remain unknown.
90 Some of the above decisions contemplate a second chance to show impecuniosity. Clearly that may be relevant in the future at the point in time when discoveries are complete."

35  Based on the evidence before me on the present motion there is clearly a need to reconsider the security for costs question at this point in time.

36  A key area of examination in this regard is the nature of the plaintiff's arrangements with his present counsel.

VI. The "Assignment"

37  It is obvious that this case has many unusual characteristics. One such unusual element relates to the basis upon which present counsel for the plaintiff is involved in this litigation.

38  It now appears that at the time in 2010, when the plaintiff was filing an affidavit before me seeking an exemption from a security for costs order based on his circumstances, there was already in place an arrangement with a company known as Canadian Corporate Legal Services Inc. ("CCLS")

39  CCLS would seem to be a corporation that is owned by a paralegal who is licensed under the Ontario legislation.

40  Amongst the authorities cited by the defendants is An Act respecting Champerty. Osgoode Hall law School has consolidated various items of Ontario law in a Digital Commons that was established in 1980. (see http://digitalcommons.osgoode.yorku.ca/rso).

41  That website indicates that "Ontario Statutes published in Appendix A are Imperial Acts and Parts of Acts relating to Property and Civil Rights that were Consolidated in The Revised Statutes of Ontario, 1897, Volume III, pursuant to Chapter 13 of the Statutes of Ontario, 1902, that are not repealed by the Revised Statutes of Ontario, 1980 and are in force in Ontario subject thereto."

42  In its entirety the statute reads:

An Act respecting Champerty

HIS MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

Champertors be they that move pleas and suits, or cause to be moved, either by their own procurement, or by others, and sue them at their proper costs, for to have part of the land in variance, or part of the gains. 33 Edw. I.
All champertous agreements are forbidden, and invalid., (Added in the Revision of 1897.)

43  However, in more recent years Ontario's lawyers have been permitted to participate in a contingent fee system in order to amongst other things, enable Litigants to participate in litigation on a basis other than advancing their own cash. This contingent fee system is supported by the those who believe that greater access to justice at a reasonable cost is a worthy goal.

44  The problem before me is that the principal of CCLS was cross examined on an affidavit because there was real doubt as to by whom counsel for the plaintiff was actually being paid. I am not certain that I am satisfied as to what the actual arrangement was, even now. That answer depends largely on the interpretation of a single document.

45  That document prepared by Canadian Corporate Legal Services Inc. and signed by the plaintiff, with my bolding added, reads in its entirety:

ASSIGNMENT

RE: Jian Ya Li v. Fo Ling Li et al
The undersigned hereby assigns the above matter to Canadian Corporate Legal Services for settlement, litigation and collection.
In the event litigation is required, the asssignor shall pay legal fees as follows: $500.00 to review file $2500.00 for any motions, $2000.00 for discovery, and all disbursements necessary and required to prosecute the litigation. Further fees for steps to be taken after discovery will be dealt with at that time. Claim is already been issued. The assignor's present counsel is preparing requests for document [sic] and shall continued to prepare them.
The Assignee shall have the right to assign counsel on its behalf to pursue such litigation as it deems necessary. Legal fees are payable in advance and shall be provided to the assignee within 10 days of request.
All funds received by the assignee with regard to the herein matter shall be deposited into the trust account of the Assignee and the assignor hereby authorizes and consents to such deposit. The assignee shall retain 15% of any monies collected and the full remaining balance of any monies will, upon clearing, be immediately released to the assignor (client).
After obtaining judgment. The Assignee will search for assets of proceed with whatever examinations or execution proceedings are necessary. The Assignee will only pay for disbursements, unless such steps involve legal proceedings in which case they shall be charged as follows: writ of execution, $200.00 plus disbursements; Garnishment $250.00 plus disbursements; examination in aid of execution, $500.00 plus disbursements.
The assignor will refrain from further contact with the debtor, or his agents, in this matter.

The assignor agrees to provide the Assignee with all
reasonable assistance necessary for the prosecution of
this matter agrees to appear in court when necessary.

The assignee shall report all developments in this matter to the assignor in a timely manner.
DATE: 3/15/10
SIGNED: Jian Ya Li.
COMPANY:__________

46  The first security for costs motion was heard in August of 2010. This Assignment document is dated March 15, 2010.

47  Is this an assignment of the debt by an assignor? Or is it a contract retaining a collector and giving that entity an assignment of a portion of that indebtedness if it successfully collects the debt?

VII. Law Society Response

48  Counsel for the defendants', at least before seeing the above document, asserted that the arrangement appeared to be an absolute assignment of the debt such that CCLS might either be responsible for posting further security or were improperly carrying forward someone else's claim.

49  As a consequence the matter was brought to the Law Society's attention by way of a request to investigate the conduct of the present counsel of record for the plaintiff.

50  Following that request Law Society Intake Counsel wrote in part:

"Based on my review of the documents provided, I have concluded that, although regulatory issues may have been raised, given all of the circumstances in this matter, a request to investigate the conduct of [counsel] pursuant to section 9.3 of the Law Society Act is not warranted at this time. Consequently, I have closed the file."

51 As the notice of this motion was provided to the Intake Counsel she further observed:

In your May 15, 2015 Notice of Motion, you are seeking, among other relief, an Order providing direction as to the propriety of [counsel] appearing as counsel at examinations for the Motion and the hearing of the Motion. The supporting affidavit ... raises many of the same issues alleged in your Law Society complaint, such that those allegations are currently before the Court. Where the issues in a complaint are the same as or are related to ongoing external litigation, the Law Society considers whether it is in the public interest to investigate immediately, or to await the conclusion of the legal dispute. In this case, I am not able to identify a compelling public interest in proceeding to investigate immediately, and a conclusion to the legal dispute would likely help any investigation the Law Society may conduct. In addition, it is important that there are not parallel and simultaneous fact-finding exercises being conducted. Please let me know the outcome of the Motion in which you are seeking direction as to the propriety of [his] appearing as counsel at examinations and at the Motion.

52 Counsel for the defendants argues that "the agreement - the Assignment, as it is called - between Mr. Li and CCLSI" clearly appears to either "dispose of or encumber" not just any asset but the litigation itself.

VIII. Defendants' Position

53 The Defendants raise these provisions of the Law Society Act dealing with prohibitions and offences relating to corporations:
Requirement to be professional corporation
61.0.7(1) No corporation, other than a corporation that has been incorporated or continued under the Business Corporations Act and holds a valid certificate of authorization, shall practise law in Ontario or provide legal services in Ontario. 2006, c. 21, Sched. C, s. 90.
Holding out, etc.

No corporation, other than a corporation that has been incorporated or continued under the Business Corporations Act and holds a valid certificate of authorization, shall hold out or represent that it is a professional corporation, that it may practise law in Ontario or that it may provide legal services in Ontario.

Compliance with certificate of authorization

No corporation shall practise law in Ontario or provide legal services in Ontario except to the extent permitted by the corporation's certificate of authorization.

Holding out, etc.

No corporation shall hold out or represent that it may practise law in Ontario or that it may provide legal services in Ontario, without specifying, in the course of the holding out or representation, the restrictions, if any,
on the areas of law that the corporation is authorized to practise or in which the corporation is authorized to provide legal services; and
on the legal services that the corporation is authorized to provide.

Satisfaction of conditions

No corporation shall practise law in Ontario or provide legal services in Ontario when it does not satisfy the conditions set out in paragraphs 2, 3 and 4 of subsection 3.2 (2) of the Business Corporations Act and subsections 61.0.1 (4) and (5) of this Act.

54  Counsel for the Defendants further asserts that the owner of CCLS filed an affidavit and was cross examined with respect to this motion. There the company asserted that the intent of the "Assignment" is simply a 15% entitlement in exchange for their collection services assisting in endeavouring to recover the amount owed or claimed by the plaintiff.

55  The issue raised, at least on an interim basis, is whether the present paralegal legislation authorizes a corporation owned by a licensed paralegal to retain counsel for the matter, on a contingent basis.

56  On the argument of the motion I permitted counsel retained through the corporation to argue this motion. I do not intend my permission on this occasion to be interpreted as establishing any unassailable right for future matters.

57  I acknowledge that lawyers acting on a contingent fee basis have been regarded as exempt from any requirement to contribute to a security for costs order. Certainly it would seem to undermine the concept of the role of an advocate, to require a more tangible financial contribution, in addition to a willingness to wait for recovery of a fee, if the claim as advanced is successful.

58  Nevertheless, I take the overall circumstances in this case to be a factor that I need to take into account in any event, in determining what should be done with respect to security for costs.

59  Suffice it to say that these various factors do cause me great concern with respect to what was presented before me, several years ago.

IX. Duty of Candour

60  While I agree with Justice Perell in Montrose, infra that a party "may rely on its impecuniosity as grounds to resist a motion for security for costs, particularly when the other party caused the impecuniosity "; that reliance is not unconditional. The plaintiff asserts that he is in his present financial straits by virtue of the failure of the defendants to honour their acknowledged indebtedness to him. I nevertheless adopt these submissions from the moving parties' factum concerning a duty of candour where impecuniosity alleged:

Statements to the effect that a litigant who relies on impecuniosity is required to make full and frank disclosure of all facts relevant to his financial circumstances abound in the case law:
"A litigant who relies on impecuniosity bears the onus of proof on this point and must do more than adduce some evidence of impecuniosity and must satisfy the court that it is genuinely impecunious with full and frank disclosure of its financial circumstances. "[Montrose Hommond & Co. v. CIBC World Markets Inc., [2012] O.J. No. 4004 (S.C.J.), para 34]
"In motions of this nature, the financial evidence of plaintiffs must be set out with robust particularity. There should be no unanswered material questions, as is the case here. It is worth remembering that the financial status of the plaintiffs is known only to them. "[Morton v. Canada (Attorney General), [2005] O.J. No. 948 (S.C.J.), para 32]
"Full financial disclosure is required and should include the following: the amount and source of all income; a description of all assets (including values); a list of all liabilities and other significant expenses; an indication of the extent of tbe ability of the plaintiffs to borrow funds; and, details of any assets disposed of or encumbered since the cause of action arose."[ibid]
"In order to find impecuniosity, the court must be convinced on the basis of cogent evidence that the plaintiff corporation, its shareholders, and any other persons who would be the beneficiaries of the action if it succeeded, such as its creditors, are unable to sell assets, borrow or otherwise raise the necessary funds to post security for costs. [my emphasis] [Georgian Windpower Corp. v. Stelco Inc., [2012] O.J. No. 158 (S.C.J.), para 13.]
"A party pleading impecuniosity must disclose with 'robust particularity' their financial circumstances. Complete disclosure is imperative." [JV Mechanical Ltd. v. Steelcase Construction Inc., [2010] O.J. No. 1073 (S.C.J.), para 14]
Disclosure where impecuniosity is alleged: "must leave no material question unanswered." [JV Mechanical Ltd. para15]

61 Arguably the Assignment creates "a beneficiary of the action if it succeeds" in that, CCLS, stands to participate as the beneficiary of a 15% interest in the fruits of the litigation.

62 In JV Mechanical, supra, Master Albert further observed:

"30 Evidence is material if it goes to the foundation of the decision. Such evidence may reasonably have affected the result but need not necessarily have affected it: 100 Main Street East v. Sakas.(1975) 8 O.R. (2d) 385] Because JV Mechanical provided fraudulent evidence to the court on the 2008 Motion by asserting by asserting that it had made full and complete disclosure, any ambiguity or issue of credibility ought to be decided in favour of Steelcase.
31 I find that the evidence that was not disclosed on the 2008 Motion is material to the issue of impecuniosity.Evidence is material if it goes to the foundation of the decision. Such evidence may reasonably have affected the result but need not necessarily have affected it."
...
41 It would be unjust to permit a party pleading impecuniosity to withhold relevant evidence and then blame the party seeking security for costs for not discovering it. Mr. Vrbanic ought to have disclosed all of the companies in which he had an interest and provided evidence of the financial position of each company. He painted a misleading picture of his financial circumstances.

63 Here there is an agreement between Mr. Li and CCLS that was entered into long before the motion for security for costs was heard, pursuant to which the lawyer for Mr. Li was retained, and further to which the lawyer for Mr. Li regularly sends invoices to CCLS, who then receives money from Mr. Li. Those facts were admitted by the principal of CCLS on his examination.

64 In reaction to this state of affairs, counsel for the defendants cites various portions of my earlier reasons and argues:

Clearly this is an arrangement that is patently one that, if disclosed, "may reasonably have affected the result but need not necessarily have affected it" considering:
The disproportionality of a $7,500 security for costs award in favour of the Children for a US $648,000 case, a lawsuit that the Court has already found would inevitably be "a very expensive exercise for them";
The Court's sympathetic reflection on the financial circumstances of Mr Li:

"Could there be in any more apt description of a condition of 'poverty' in a modem city, than the foregoing?"

Its reasons fixing the quantum of costs based on "a reduced partial indemnity rate";
Its decision that: "In light of the plaintiff's apparent circumstances, I am not requiring the posting at this time of any security in respect to HST or disbursements." ...
It is submitted that this case is an excellent example of how the failure to make such disclosure when it was required in fact does threaten to abuse or interfere with the administration of justice.
It most certainly does from the point of view of the Children."

65  I am satisfied that the existence of the Assignment ought to have been disclosed on the original motion. Regardless of the circumstances the fact that the plaintiff was obliged to make progress payments to CCSL and that the company stood to receive 15% of any recovery without any potential cost exposure if the action failed strikes me as relevant factors that should have been disclosed to the court.

66  Regardless of whether there was a failure to make a disclosure that the case law indicates was mandatory, I am satisfied, that in the present circumstances further security needs to be posted on behalf of the Plaintiff.

X. Plaintiff's Issues

67  In coming to my conclusion, I considered as well the lack of progress in this matter.

68  I made clear orders requiring that the plaintiff attend for discovery. He did not. The correspondence between counsel is unsatisfactory. I cannot understand whether or not there was an intent to hold the discoveries that resulted and why it was postponed. An affidavit filed at the time of the motion sets out that the plaintiff was very sick: I accept he is in poor health and becoming more aged. But if he wants to get to trial, solutions on how to conduct effective pre-trial discovery need to be found.

69  Clearly the defendants need to provide the specific financial information on where the Clapperton proceeds went.

70  As well the particulars of their newly asserted equitability claims need to be provided.

71  I will convene a telephone case conference to establish further discovery dates at the request of either side.

72  Following a day of argument, perhaps some reason came to the matter and I discussed in court the possibility of written interrogatories being submitted by the defendants to the plaintiff, so that he would not have to travel to Ontario and the costs could be kept down

73  In the alternative, Skype or a similar system should be utilized to conduct the discovery of the Plaintiff within the first quarter of the coming year.

74  This seems to me a reasonable solution primarily as the questions really relate to what documentation is available and what was the understanding at the time the funds were not paid to the plaintiff.

75  It seems to me that if we go ahead on that basis costs prior to trial could be significantly less. Similarly, limiting the defendants discovery by the plaintiff to a total of no more 1 days, will keep the cost down.

76  The plaintiff will be in a position to set the matter down for trial after those discoveries are over.

77  I have already extended the set down date to June 30 2017. I am further extending the set down date my own motion, for what I regard as one last chance to the parties to December 31, 2017. I have no present inclination to extend that date further unless both sides are in agreement.

XI. Relevance of Strength of Plaintiff's Case

78  I am satisfied that my previous order was based on an incorrect understanding of the factual situation. As well, the plaintiff has not done anything to move his action forward in the face of that generous security for costs situation.

79  Justice Gans considered the relevance of the strength of the plaintiff's case in Stojanovic v. Bulut, 10 C.P.C. (7th) 299; 2011 CarswellOnt 7846; 205 A.C.W.S. (3d) 346. This was an appeal from Master Dash's decision in which he refused to accede to the defendants' request for an order for security for costs pursuant to rule 56.0 1.

80  His Honour considers "Financial Hardship" and notes:

"7 I first observe that the subject sub-rule does not speak to either the notion of "impecuniosity" or "financial hardship". These terms appear as part of the judicial gloss, which has attached to rule 56.0l(e) overtime, presumably as part of the broad judicial discretion in deciding whether security for costs is just in the circumstances.
8 From my review of the cases, it would appear that a person can establish that he is impecunious if he can satisfy the court with "robust particularity" that he is "in need of money, poor, penniless, impoverished or needy".'
9 Unfortunately, the case law does not define "financial hardship" in the context of security for costs and distinguish it from "impecuniosity". Indeed, sometimes the two terms are referred to almost synonymously; other times, as in the decisions of Master Dash to which my attention was directed, "financial hardship" is recognized as something less than "impecuniosity'', but often without further discussion.
10 Master Dash has himself observed in other cases that when one is resisting an order for security for costs by suggesting that he would experience financial hardship if an order were made, as the responding plaintiff, he is impressed with an onus to prove the negative financial effects that such an order will have and that such would otherwise be unjust."

81  Justice Gans notes, "I hasten to observe that I do not accept the Respondent's argument that it was unnecessary for the Master to make a finding of financial hardship as part of the analysis since he found as a fact that the plaintiff had a "good cause of action". The cases hold that short of a finding of impecuniosity, a finding of financial hardship is a necessary pre-condition to considering a case on the merits and is but one of the circumstances, in a constellation of factors, that must go into the mix.

82  Considering all the factors at play in this case I am satisfied that an order for more security to be posted is clearly justified. However proportionality still has a role to play.

83  I am still of an open mind with respect to the Plaintiff's possibility of success at trial.

84  I am also cognizant of the observation in the closing paragraphs of the Factum of the defendants:

Many years ago Mr. Li commenced a lawsuit against the Children, alleging that they were liable to him for US $648,000 for fraud.
Applying the current exchange rate and some interest, this translates into about $1 million.
And Mr. Li has vigorously pursued this as a million dollar case, seeking voluminous records and information from the Children in respect of their private affairs for a period that spans more than a decade - indeed records that reach back to a time when two of the four Children were minors - and all the while doing so without any regard for the quantum of the security for costs previously ordered by this Honourable Court.
In the process he has caused the Children to incur a fortune in legal fees and to suffer great emotional distress.
Mr. Li has shown that in the absence of a truly meaningful security for costs award - that is, an award that is proportionate to the amount claimed and the manner in which Mr. Li has chosen to pursue this lawsuit - he will continue in this relentless quest without any regard for how much it costs the Children in legal fees.
It appears, in fact, that he believes himself immune to a costs award being made against him at trial, which means that as long as there is nothing more than a $7,500.00 security for costs award (an amount that he was able to post reasonably quickly after it was ordered) he will continue to behave as if he is immune to a costs award being made against him at trial.
Indeed, as it stands, he is even immune to the two interlocutory costs awards already made in this action -one in the amount of $10,500 made on the motion for security for costs (which the Children ask be varied, as below) and, more recently, one in the amount of $10,000 as made by an Order dated January 16, 2015 - as both were made in the cause.
And in all events, Mr. Li can behave as if he is immune to a costs award after trial so long as the $7,500 security for costs award stands because while he is clearly not impecunious, he is also, as this Court has found, judgment-proof:

44 Clearly, this can be a very expensive exercise for them and given the evidence of the plaintiff as to his lack of assets, it would seem a virtual certainty that if the Defendant Children ultimately prevail, they will be unable to recover any cost awards made against the plaintiff.

Mr. Li got to this point by leading the Court to believe that he was not only impoverished but utterly alone, with no friend or ally on the planet to turn to in the event he was ordered to pay costs for his litigation; that he was, to use his own words, without "ability to borrow funds from any source".
But in fact, all along, he really had a hidden, silent, partner, CCLSI, with its own significant stake in the fruits of the litigation.
The result of it all is that the ordinary and usual dynamics of litigation do not apply to Mr. Li, and he is left able to engage in countless motions, discoveries, examinations, affidavits, etc., without worrying about his potential exposure for the Children's costs.
And the ordinary and usual dynamics of litigation apply even less to Mr. Li's partner CCLSI, even though it is arguably the true plaintiff in this case given the plain terms of the Assignment.

85  The foregoing submissions make a strong case for further security to be posted by the plaintiff at this time. However, the other factors above also to be weighed. As well the guidance of the Supreme Court of Canada in its decision in Hryniak v. Mauldin needs to be considered.

XII. Impact of Alleged Champerty

86  In the time period between the present motion and the initial security for costs motion, Justice Perrell considered new forms of litigation fianacing arrangements that might be available for class actions in Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp.;117 O.R. (3d) 150; 2013 ONSC 4974.

87  In acknowledging the need to consider new forms of costs support, he observed:

[35] It may be wise for the legislature to revisit whether any of this is what it intended when it rejected the Law Reform Commission's recommendation that class actions not be governed by the loser-pays principle. In the meantime, the court is now challenged with developing the jurisdiction to determine when third party funding should be approved for a particular case.
[36] This challenge is exacerbated by the difficulty illustrated by the case at bar that the motion for approval may be an unopposed motion.
[37] In the case at bar, although the defendants do not consent, they do not oppose third party funding for the obvious reason that they have been appeased by the term of the court's approval that security for costs be posted. Thus, courts have been left to develop the approval criteria for third party funding largely on their own initiative, relying on common sense, knowledge of the problems of access to justice and of the administration of justice, and academic commentary. Justice Leitch's pioneering work in Metzler Investment GMBH v.Gildan Activewear Inc., [2009] O.J. No. 3315, 81 C.P.C. (6th) 384 (S.C.J.) was very valuable in developing criteria as was Justice Strathy's work in Dugal v. Manulife Financial Corp.,supra, and I attempted to make a contribution inFehr v. Sun Life Assurance Co. of Canada,[2012] O.J. No. 2029, 2012 ONSC 2715 (S.C.J.).
...
[39] Based on the Canadian case law, I am satisfied that the third party litigation funding agreement in the case at bar should be approved. Put somewhat differently and more cautiously, I am satisfied that third party litigation funding agreements are approvable and that there is reason to approve and no known reason not to approve the agreement in the case at bar.
[40] A note of caution is necessary because the concept of third party funding is a work in progress and subsequent cases may identify problems that I have overlooked.
[41] To be more expansive, I can extract the following principles from the developing case law that support the conclusion that the court should approve the funding agreement in the case at bar:
* Third party funding agreements are not categorically illegal on the grounds of champerty or maintenance, but a particular third party funding agreement might be illegal as champertous or on some other basis.
* Plaintiffs must obtain court approval in order to enter into a third party funding agreement.
* A third party funding agreement must be promptly disclosed to the court, and the agreement cannot come into force without court approval. Third party funding of a class proceeding must be transparent, and it must be reviewed in order to ensure that there are no abuses or interference with the administration of justice. The third party agreement is itself not a privileged document.
* The court has the jurisdiction to make an approval order binding on the class pre-certification of the class: Fehr v. Sun Life Assurance Company of Canada, supra; Dugal v. Manulife Financial Corp., [2011] O.J. No. 1239, supra; Metzler Investment GMBH v. Gildan Activewear Inc., supra, contra.
* To be approved, the third party agreement must not compromise or impair the lawyer and client relationship and the lawyer's duties of loyalty and confidentiality or impair the lawyer's professional judgment and carriage of the litigation on behalf of the representative plaintiff or the class members.
* To be approved, the third party funding agreement must not diminish the representative plaintiff's rights to instruct and control the litigation.

88 These observations, mutatis mutandis could well apply to the present financing and carriage arrangements. As a consequence I am not basing my decision on there being potentially champertous elements involved in the previous financing of the plaintiff's case.

89 Rather I am following the guidance of Master R. Beaudoin as he then was addressed security for costs in Bexley Trading Inc. v. Ottawa Health Research Institute, [2007] O.J. No. 196; 45 C.P.C. (6th) 332; 154 A.C.W.S. (3d) 560 where the plaintiffs sued the defendant for damages of US$ 15million for breach of contract to perform a clinical study of a medical device. The defendant sought to increase the security posted for costs from $45,000 to $263,000. The court observed:

26 With the greatest respect to its counsel, Bexley misunderstands the heavy onus upon it to establish impecuniosity and that this requires complete candour with respect to the corporation's financial operations. As Justice Doherty (as he then was) stated in Hallum v.Canadian Memorial Chiropractic College [1989] O.J. No. 1399 (Ont. H.C.) at para. 18:
The onus rests on the part relying on impecuniosity, not by virtue of the language of Rule 56.01, but because his financial capabilities are within his knowledge and are not known to his opponent; and because he asserts his impecuniosity as a shield against an order as to security for costs: Sopinka and Lederman, the Law of Evidence in Civil Cases (1974), at p. 395.
27 Gaps in inadequate evidence are not remedied by the lack of cross-examination. The onus never shifts from the party claiming impecuniosity and there is no obligation on the part of a responding party to cross-examine a deponent whose affidavit is deficient.
...
29 Mr. Chartrousse does not disclose how this litigation is being funded. He has maintained two sets of counsel, in Canada and the U.S. Bexley's US attorney, Mr. Bemis, sat in on the discoveries here in Ottawa until the defendants objected and he was removed by court order. This is the same Mr. Bemis who was with him in Paris on November 14th, 2006. In an earlier decision, Bensuro Holdings Inc. v.Avenor Inc. [1998] O.J. No. 5445 (S.C.J.), I expressed reservations into making inquiries of how a party might be funding litigation since this might intrude on solicitor-client privilege. In Di Paola (Re) [2006] O.J. No. 4381 Doherty, J.A. suggests that there may be an onus on a party claiming impecuniosity to reveal how the litigation is funded. Similar comments can be found in Kurzela et al v. 526442 Ontario Ltd.,[1988] O.J. No. 1884 (Div. Ct.) where Justice McRae noted the decision of O'Driscoll J. in Buffer Investments Inc. v. RoyNat Inc. (1988), 26 C.P.C. (2d) 55 at 61-2 (Ont. H.C.J.) where he asked himself rhetorically:
Can the plaintiffs avoid the obligation to post security? It is agreed that the plaintiffs have no assets. In this case, does justice demand that the plaintiffs be allowed to proceed without posting security notwithstanding the impecuniosity?
It will be noted that for some three and one-half years, Buffer and J-court have fuelled this litigation; there must be a source of funds some place, somehow I cannot imagine that Buffer and J-court are proceeding on a Legal-aid certificate.
30 In short Bexley has not met heavy onus of establishing that it is impecunious and it must post additional security for costs.

90  In short the plaintiff has not met the heavy onus of establishing that he is presently impecunious and he must post additional security for costs. The determination of "how much?" requires further analysis.

XIII. Guidance of Supreme Court in Hryniak v. Mauldin

91  In coming to my conclusions in this matter, I am guided by the judgment of Justice Karakatsanis in the Supreme Court of Canada's seminal decision in Hryniak v. Mauldin, [2014] 1 S.C.R. 87; [2014] S.C.J. No. 7; 2014 SCC 7. There, in determining the general principles to be followed with respect to summary judgment, the court began with a review of the values underlying "timely, affordable and fair access to justice." In this regard the court specifically focuses upon "Access to Civil Justice: A Necessary Culture Shift."

92  I have long championed the broad use of proportionality to seek to optimize the process to suit the dispute. In particular I have considered and annotated the following extracts from portions of the Supreme Court's judgment:

23 . This appeal concerns the values and choices underlying our civil justice system, and the ability of ordinary Canadians to access that justice. Our civil justice system is premised upon the value that the process of adjudication must be fair and just. This cannot be compromised.
24 However, undue process and protracted trials, with unnecessary expense and delay, can prevent the fair and just resolution of disputes. The full trial has become largely illusory because, except where government funding is available, ordinary Canadians cannot afford to access the adjudication of civil disputes. The cost and delay associated with the traditional process means that, ... the trial process denies ordinary people the opportunity to have adjudication. And while going to trial has long been seen as a last resort, other dispute resolution mechanisms such as mediation and settlement are more likely to produce fair and just results when adjudication remains a realistic alternative.
25 Prompt judicial resolution of legal disputes allows individuals to get on with their lives. But, when court costs and delays become too great, people look for alternatives or simply give up on justice. Sometimes, they choose to represent themselves, often creating further problems due to their lack of familiarity with the law.
27 A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.
28 This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible - proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure. (my emphasis)

93  While the actual decision focused on the availability of summary procedures, I believe the philosophy espoused applies to any civil action.

XIV. Applying Proportionality

94  I acknowledge my responsibility for a portion of the delay in this matter. However, I had thought the parties were moving forward in parallel with this reserve. Clearly this case needs to be now expedited in order to try to reach an acceptable resolution. In particular, it seems that what needs to be determined is what happened to the proceeds from the sale of Henry's Milk and how the property on Clapperton was purchased. Surely a title search will disclose what mortgages were on title, if any. As well the documentation on title should indicate what happened to those mortgages, if there were any.

95  When the property was sold there should be a statement of adjustments that should be obtainable from the lawyer acting for the purchaser or the vendor and a rule 30.10 more motion could be brought if necessary.

96  To the extent that documentation is not yet available, it is to be obtained by January 31 2017.

97  Once it is obtained, the defendants shall be entitled to deliver written interrogatories, which shall be answered within 30 days of their delivery. The answers shall be accompanied by a sworn statement that the answers are true.

98  Based on my understanding, the fact situation in this case, I do not believe that an "in person" examination for discovery of the plaintiff should be necessary. However, that is for the the defendants' counsel to determine.

99  Having regard to the age and health condition of the plaintiff I am prepared to order a video discovery via Skype to keep the costs down. This does not seem to be a case where credibility with respect to the dealings between the plaintiff and most of the remaining defendants will be pivotal.

100  It would seem that the parties need to decide whether or not this case is worth fighting any further. Once the plaintiff has the information with respect to the one property that seems to perhaps have some value, a determination can be made as to whether or not the case is continuing.

101  The defendants sought an order dispensing with a mediation in this case. I am not satisfied that that is a wise course of action and I am refusing that order, without prejudice to either party being entitled to reapply when the facts are clearer.

XV. Further Security

How much

102  At the conclusion of the previous motion, I directed the plaintiff to post within 90 days, the sum of $7500 with the Accountant of the Court, or as counsel might agree.

103  This order was apparently complied with such that there is presently $7500 of security on deposit.

104  On this motion, the partial indemnity calculation of the defendants to the completion of discoveries seeks $29,526.10. I am satisfied that the rates and time estimates set out are reasonable. However, the calculation of the foregoing sum includes an alteration to my previous order having the effect of requiring the posting of security for the amount of $10,000, which I previously ordered as the costs of the motion payable "in the cause" of the claims against the Defendant Children .

105  I am not satisfied that the earlier cost order should be varied at this time. As a consequence, the amount of costs to the end of discoveries would seem to total approximately $19,500. Taking into account the previously posted sum of $7500, results in a balance of approximately $12,000, which I regard is reasonable in all the circumstances. I am therefore requiring the posting of additional security in the amount of $12,000 and, and directing to be posted at this time.

106  The said sums to be subject to variation pursuant to rule 56.07, but otherwise is intended to be the amount necessary to be posted through to the completion of discoveries inclusive of discovery motions which of course will potentially result in specific costs orders.

107  Of more difficulty are the fees sought to the completion of trial, which is based on an estimated five day trial. The total sought in that regard, including HST and disbursements is $38,870. Applying proportionality, I feel that $30,000 is sufficient to provide meaningful security applying proportionality in considering possibilities of success of the plaintiff's action as contemplated by Justice Gans.

When?

108  Based upon the arguments of both sides, I have concluded that the plaintiff seems to been able to find money to pay the lawyers, acting on his behalf, at least to a limited degree. If he genuinely thinks that his substantial monetary claim has merit, he should find a way to put up the necessary additional security for costs.

109  This however is a case where staged posting of security still seems appropriate to me. I am therefore directing that the further sum of $2500 of the $12000 calculated above, be paid on or before February 28, 2017, as additional security for costs in this matter in accordance with the provisions of rule 56 and in particular, rules 56.04 and 56.06.

110  The final $9500 component of the $19,500 shall be paid 60 days from the delivery of the information that I am directing the defendants to produce with respect to the real estate involved. He should post this portion within 60 days of his counsel being provided with the full detail by the defendants concerning the proceeds from the sale of the Clapperton property.

111  To be clear, I am expecting them to provide the plaintiff with the full detail available to them concerning the receipt and disbursement proceeds from the sale of the Clapperton property and any related predecessor and successor properties.

112  What I have in mind is a relatively full disclosure of the available financial particulars which would include clarification on a number of questions. I would expect information to be provided such as the proceeds of the sale of the property and a full disclosure of how the original purchase was funded. For example, was there a vendor takeback or other mortgage? Against the property? How were those mortgages discharged along the way? What happened to the money that was generated when the property was sold? To which children did it go? On what basis? Was it put into another piece of real estate?

Additional security

113  Once that information is determined the plaintiff can decide whether or not there is any point in trying to bring this action on for trial. Failing which the defendants will be in a position, to seek to recover their costs from the security posted.

114  Assuming the plaintiff elects to proceed to trial . I am directing that the plaintiff post, the sum of $30,000 in two installments. $15,000, for security for the period up to the point of the settlement conference. This amount is to be paid no earlier than September 30, 2017, but otherwise within 90 days of the action being set down for trial by either side. The remaining $15000 is to be paid be paid 90 days before the scheduled trial date.

115  In all cases, a letter of credit or other form of acceptable security can be posted in lieu of cash.

XVI. Disposition

116  I have indicated a number of interim findings throughout this admittedly overlong reasons.

117  In the result, I am prepared to execute an order reflecting the various findings and directions contained in these reasons. The moving party is to prepare a draft order and submit it to the plaintiff's counsel for review and approval as to form and content. If there is a difficulty in this regard, I will convene an in-person case conference.

118 The moving defendants been largely successful on this motion. I am satisfied that they are entitled to their costs of this motion on a partial indemnity basis payable within 120 days of the release of these reasons.

119 The moving party shall provide written submissions regarding the costs of this motion to be served and filed by January 15, 2017. Responding submissions to be filed with my ATC by the end of January. In each case, the written submissions should be no more than five pages in length.

MASTER D.E. SHORT