Date: 20071219
Docket: A-207-07
Citation: 2007 FCA 409
PRESENT: NOËL
J.A.
BETWEEN:
B-FILER INC., B-FILER INC. doing business
as
GPAY GUARANTEED PAYMENT and NPAY INC.
Appellants
and
THE BANK OF NOVA SCOTIA
Respondent
REASONS FOR ORDER
NOËL J.A.
[1]
The
respondent brings a motion asking that security for costs be provided by the
appellants before the appeal can proceed any further. To the extent that the
appellants fail to provide security, the respondent asks that their appeal be
dismissed without further notice.
BACKGROUND
[2]
The
respondent was awarded costs in the amount of $887,049.62 by the Competition
Tribunal at the conclusion of a proceeding during which it successfully
countered an allegation that it refused to deal with the appellants contrary to
subsection 75(1) of the Competition Act, R.S.C. 1985, c. C-34. The
appellants have brought an appeal against this decision, and have yet to pay
the costs which were awarded against them.
[3]
The
respondent has produced a projected bill of costs with respect to the
forthcoming appeal in which it estimates that costs in the amount of $35,427.00
will be incurred to respond to the appeal. It asks that security be provided
for the outstanding cost award made by the Competition Tribunal, as well as the
projected costs of the appeal, which in total amount to $922,476.62.
[4]
The
appellants do not challenge the fact that the cost award made by the
Competition Tribunal is presently owing and that they have failed to pay the
outstanding amount despite repeated demands by the respondent nor do they
challenge the amount awarded by the Competition Tribunal in the appeal they
have brought. However, they submit that they have no substantial stream of
income at the present time by reason of all major Canadian Banks now refusing
to supply banking services to them and that they have no assets to satisfy the amount
sought. According to the appellants, their appeal should be allowed to proceed
without the payment of the outstanding costs and without providing security
because their appeal is meritorious and raises matters of public interest.
ANALYSIS AND DECISION
[5]
I do not
believe that there is any entitlement to security with respect to the costs
which the respondent has projected with respect to the current appeal. The only
basis for securing such costs is that provided in Rule 416(2) of the Federal
Courts Rules which authorizes the Court to grant security in stages “as
costs are incurred”. The respondent is free to reframe its motion on that
basis, but the present application insofar as it seeks to secure projected
costs cannot succeed.
[6]
The
respondent has however demonstrated that it is entitled to an order for
security with respect to the outstanding cost award made by the Competition
Tribunal pursuant to both paragraphs (b) and (f) of Rule 416
which provides respectively:
|
Where
security available
416.
(1) Where, on
the motion of a defendant, it appears to the Court that
(b)
the plaintiff is a corporation, an unincorporated association or a nominal
plaintiff and there is reason to believe that the plaintiff would have
insufficient assets in Canada available to pay the
costs of the defendant if ordered to do so,
(f)
the defendant has an order against the plaintiff for costs in the same or
another proceeding that remain unpaid in whole or in part,
the
Court may order the plaintiff to give security for the defendant's costs.
|
Cautionnement
416. (1) Lorsque, par
suite d’une requête du défendeur, il paraît évident à la Cour que l’une des
situations visées aux alinéas a) à h) existe, elle peut
ordonner au demandeur de fournir le cautionnement pour les dépens qui
pourraient être adjugés au défendeur :
b) le demandeur est une personne morale ou
une association sans personnalité morale ou n’est demandeur que de nom et il
y a lieu de croire qu’il ne détient pas au Canada des actifs suffisants pour
payer les dépens advenant qu’il lui soit ordonné de le faire;
f) le défendeur a obtenu une ordonnance
contre le demandeur pour les dépens afférents à la même instance ou à une
autre instance et ces dépens demeurent impayés en totalité ou en partie;
|
[7]
Once entitlement to
security has been established pursuant to Rule 416, the burden shifts on the
other party to demonstrate that an order for security should nevertheless not issue:
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Grounds for refusing security
417.
The
Court may refuse to order that security for costs be given under any of
paragraphs 416(1)(a) to (g) if a plaintiff demonstrates
impecuniosity and the Court is of the opinion that the case has merit.
|
Motifs de refus de cautionnement
417.
La
Cour peut refuser d’ordonner la fourniture d’un cautionnement pour les dépens
dans les situations visées aux alinéas 416(1)a) à g) si le
demandeur fait la preuve de son indigence et si elle est convaincue du
bien-fondé de la cause.
|
[8]
Even if I assume for
present purposes that the appellants’ appeal has merit, they have not
established that they are impecunious.
[9]
The appellants have limited
their response to the present application insofar as it relates to their
financial circumstances to an admission that they do not have the assets or the
income stream to satisfy the outstanding award of costs. This does not satisfy
the onus which they bear to show that they are impecunious. The appellants’
financial circumstances are within their own knowledge and it is difficult for
any one else to learn more than what the appellants choose to disclose. In this
case, the appellants have, in effect, pleaded impecuniosity without advancing
any material evidence establishing that they are indeed without resources.
[10]
In Heli-Tech
Services (Canada Ltd. V. Weyerhaeuser Co., 2006 F.C.J. No 1494, the Federal
Court stated at para. 8:
As to the evidence
required to prove impecuniosity, a high standard is expected; frank and full
disclosure is required. That is, the onus must be discharged with "robust
particularity", so that "there be no unanswered material questions (Morton v. Canada
(Attorney General) (2005), 75 O.R. (3d) 63
(S.C.J.) at para. 32).
[11]
A few paragraphs
earlier (at para. 6), the Federal Court quoted the following passage from the
decision of the High Court of Ontario in Smith Bus Lines Ltd. v. Bank of
Montreal (1987),
61 O.R. (2d) 688 at pages 704-705:
… The corporate
plaintiff wishing to be allowed to proceed with its action, without either
showing sufficient assets or putting up security, must first show
"impecuniosity" meaning not only that it does not have sufficient
assets itself but also that it cannot raise the security for costs from its
shareholders and associates, partly because the courts do not want a successful
defendant to be effectively deprived of costs where, for example, wealthy
shareholders have decided to carry on business and litigation through a shell
corporation. To go the impecuniosity route the plaintiff must establish by
evidence that it cannot raise security for costs because, if a private company,
its shareholders have not sufficient assets. As expressed by Reid J. in John
Wink Ltd. v. Sico Inc. (1987), 57 O.R. (2d) 705
at p. 709, 15 C.P.C. (2d) 187:
"If an order for security stops a plaintiff in its tracks it has disposed
of the suit." To raise impecuniosity there must be evidence that if
security is required the suit will be stopped -- because the amount of the
security is not only not possessed by the plaintiff but is not available to it
…
[My emphasis]
[12]
As already noted, the
appellants have filed no evidence about their financial affairs. However, we
know from the evidence before the Competition Tribunal that:
(a) The
appellants (“NPay and GPay”) are a money transfer business. NPay and UseMyBank
Services Inc. (“UseMyBank”) are Joint Venture Partners;
(b) People
wishing to gamble on-line can click on an icon called “UseMyBank”. The on-line
gambler is then directed to the UseMyBank website. The on-line gambler is then
prompted to type in his bank card number and secret on-line password;
(c) UseMyBank
takes this information and enters into an on-line banking session as if they
were the banking customer, and causes money to be transferred from the banking
customer’s account to an account held in the name of NPay or GPay;
(d) The
money is aggregated, and is eventually sent off-shore to casino management
companies or other payment processing gateways;
(e) In
2006, the Joint Venture processed over $60 million, over $58 million of which
was directed to internet casinos;
(f) NPay
and UseMyBank earn money by retaining a percentage of the funds collected from
Banking customers’ accounts that they hold in trust for the internet casinos
and payment processing gateways. They also make money by keeping a percentage
of the foreign exchange spread when converting the banking customers’ Canadian
dollars into the currency by which their casino accounts are funded;
(g) NPay
and GPay are companies incorporated in the Province of Alberta. Raymond Grace is the President of both NPay
and GPay;
(h) The
NPay and GPay business are run out of Mr. Grace’s basement, with only one or
two other full-time employees.
[13]
In support of its
application, the respondent has asserted, and the appellants have not
challenged, the fact that virtually all of the money earned by NPay as a result
of its Joint Venture arrangement with UseMyBank has been paid out to NPay’s
shareholder, Raymond Grace. Similarly, the appellants have not challenged the
respondent’s assertion that UseMyBank also has an interest in this litigation,
and that it and its principal, Jospeh Luso, have the financial resources to
secure the outstanding cost award.
[14]
Based on the record
before me, the appellants have failed to meet the burden of establishing that they
are impecunious.
[15]
An order will
therefore issue compelling the appellants to post security in an amount
commensurate with the costs award made by the Competition Tribunal within thirty
days from the date of this order, failing which the appeal will be dismissed
without further notice. The order will also provide that no further step shall
be taken in the appeal until security is posted in accordance with this order.
The respondent shall be entitled to the costs of the application.
“Marc Noël”
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