IN THE SUPREME COURT OF NOVA SCOTIA
Citation: Lyn-Gor Development Inc. v. Canada (Attorney General) ,
2004 NSSC 270
Date: 20041007
Docket: SH 176156; 174015
Registry: Halifax
Between:
Lyn-Gor Development Inc., a body corporate
Plaintiff/Defendant
by Counterclaim
v.
The Attorney General of Canada
Defendant/Plaintiff
by Counterclaim
and
The SGE Group Inc.
Defendant/Plaintiff
by Counterclaim
Date: 20041007
Docket: SH 196526
Registry: Halifax
Between:
BMS Services (1998) Ltd., a body corporate, VCI
Controls Inc., a body corporate, Dave Pace
Plumbing and Heating Limited, a body corporate,
and Power Electrical Systems Limited, a body corporate
Plaintiffs
v.
Lyn/Gor Development Inc., a body corporate
Defendant
and
Defence Construction Canada (1951) Limited
Third Party
Judge: The Honourable Justice Glen G. McDougall
Heard: September 1, October 6 and 7, 2004 in Halifax, Nova Scotia
Written
Decision: January 11, 2005
Counsel: Gordon Genge, on behalf of Lyn/Gor Development Inc.
Jonathan D.N. Tarlton and Angela Green, on behalf of the Department of Justice (Canada) and Defence Construction Canada (1951) Limited
Harvey L. Morrison, Q.C. and John MacDonald, on behalf of SGE Group Inc.
Peter D. Stanhope, on behalf of BMS Services
By the Court: (Orally)
[1] What we have before us are five separate applications. The first three applications were made by the Defendants in two actions that were commenced by Lyn/Gor Development Inc. The three defendants are the Attorney General of Canada, the SGE Group Inc. and also Defence Construction Canada (1951) Limited. These applications include, first, a request that the court prohibit Mr. Gordon W. Genge who is the President and Director of Lyn/Gor Development Inc. from continuing to act as its legal representative. These two actions have been consolidated under one file, SH No. 176156. Secondly, these applications include a request by the defendants, for an order for security for costs against Lyn/Gor Developments Inc.
[2] The fourth and fifth applications were brought by Lyn/Gor Developments Inc. It originally sought an order for security for costs against the Attorney General of Canada, the SGE Group Inc., Defence Construction Canada (1951) Limited and the following plaintiffs in another action, SH No. 196526: BSM Services (1998) Limited, VCI Controls Inc., Dave Pace Plumbing and Heating Limited and Power Electrical Systems Limited.
[3] Lyn/Gor Developments Inc. (“Lyn/Gor”) subsequently withdrew its application for security for costs against the Attorney General of Canada and is proceeding against Defence Construction Canada (1951) Limited (which I will henceforth refer to as “Defence Construction Canada”), the SGE Group Inc. (which I will henceforth refer to as “SGE Group”) and BSM Service (1998) Ltd., VCI Controls Inc., Dave Pace Pluming and Heating Limited and Power Electrical Systems Limited (which I will henceforth collectively refer to as BSM Services et al.).
[4] In terms of a brief factual scenario, I should preface my comments by saying that this is indeed a brief summary of the facts and the reason for my decision. If I decide to submit a written decision, I reserve the right to more properly articulate my decision including fleshing out reasons and, where necessary, providing additional quotations from the cases that I have used in reaching my decision.
[5] Lyn/Gor is a body corporate incorporated under the laws of the Province of Newfoundland and Labrador. It is registered to carry on business in Nova Scotia. Its agent in Nova Scotia is Mr. Gordon W. Genge. Mr. Genge claims to be a resident of Nova Scotia. When he is in Nova Scotia he normally stays at the Concorde Inn, a motel/hotel complex located in the Halifax Regional Municipality.
[6] Mr. Genge also claims to have residency in Newfoundland, Prince Edward Island and, as of late, in New Brunswick. He indicated that he has more than one residence in Newfoundland. In fact, Mr. Genge claims to reside in the place where he happens to wake up on any given day regardless of the time he might spend in that place. It lends new meaning to the adage: “home is where the heart is.”
[7] Lyn/Gor does not have an office in Nova Scotia. It has at least two offices in Newfoundland and one in Prince Edward Island. Lyn/Gor also does not own any assets, either real or personal, in Nova Scotia. It does, from time to time, work on construction projects in this province but it does not have any other type of physical presence, at least not of a permanent nature, within Nova Scotia.
[8] In addition to the matters before this court (the three separate matters of which two have been consolidated), Lyn/Gor is involved in numerous other legal proceedings. In some instances it is named as the plaintiff but in the vast majority it is named as the defendant.
[9] Lyn/Gor is a private corporation owned by Gordon W. Genge who is the President and a Director of the company and by Mrs. Shirley M. Genge, his wife, who is the company Secretary and also a Director. Other than a reference in one of the affidavits filed on behalf of Lyn/Gor, the only other evidence before this court regarding Lyn/Gor’s financial status is that it had revenues of $3.5 million dollars for the year ending April 30, 2003. Mrs. Genge, whose affidavit provided this information, could not recall on cross-examination what revenues were earned by the company for the latest year end, April 30, 2004. Neither could she recall what liabilities and expenses the company had during that period. She could not recall what salary she was paid by the company even though this is her only source of income. Nor could she recall the name of the company’s accountants but she could recall that they are located in Clarenville, Newfoundland.
[10] I will deal first with the issue of security for costs filed on behalf of Lyn/Gor against Defence Construction Canada, the SGE Group and BSM Services et al. Civil Procedure Rule 42 deals with security for costs. I refer to Motun (Canada) Ltd. v. Detroit Diesel-Allison Canada East (1998), N.S.J. 17 (N.S.C.A.) where Pugsley, J.A. stated at para 37:
Where an applicant for security establishes by “credible testimony” that there is reason to believe that a limited company, as plaintiff in an action, will be unable to pay the costs of the defendant if successful in his defence, the burden will then shift to the corporate plaintiff to establish that it was impecunious in the sense of lacking any means of raising money for security.
[11] BSM Services et al are all plaintiffs in SH No. 196526 whereas Defence Construction Canada and the SGE Group are plaintiffs by counterclaim in SH No. 176156. In order to be successful in its application Lyn/Gor, as defendant, must establish by “‘credible testimony’ that there is reason to believe that a limited company, as plaintiff in an action, will be unable to pay the costs of the defendant if successful in his defence”. If Lyn/Gor does succeed then “the burden will then shift to the corporate plaintiff to establish that it was impecunious in the sense of lacking any means of raising money for security”.
[12] There was no evidence presented that would satisfy me that the various plaintiffs could not pay costs to Lyn/Gor should Lyn/Gor be successful in its defence. As such, Lyn/Gor has failed to meet its burden and consequently its application is dismissed. I should note that the timing of these last two applications, applications number four and five, were not commenced until some considerable time after the original applications filed on behalf of the Attorney General of Canada, Defence Construction Canada and the SGE Group in April, 2004. In fact, these applications had not yet been filed when we initially got together in June to hear the first three applications. It was not done until a month or so later. I am not suggesting that this was done vindictively, although I am nonetheless concerned over the timing of these applications. It might be a situation where a good offence is a good defence. In addition to dismissing the applications I am awarding costs to BSM Services et al, that is the collective group, in the amount of $750.00 which is to be payable by Lyn/Gor within 30 days of today’s date. Under normal circumstances I would be inclined to order somewhat lower costs, but given the protracted nature of this application and the questionable motivation for making it, I am inclined to grant a little bit more than I would normally order. I am aware that counsel for BSM Services has spent a lot of time, as we all have, on these applications. However, initially its role was more to monitor and to observe what was happening. It was only later that they were forced to get directly involved in the fray.
[13] With regards to applications one, two and three, I will deal first with the issue of security for costs.
[14] I am satisfied that the applicants, the Attorney General of Canada, Defence Construction Canada and the SGE Group have met the burden of establishing that an award for security for costs should be ordered. Lyn/Gor’s financial situation is at best uncertain. It has virtually no assets in Nova Scotia. It is involved in numerous other legal proceedings. As such the defendants have a legitimate concern that the plaintiff might not be in a position to pay them costs if they are successful in their defence and are awarded costs.
[15] I have reviewed the relevant case law, particularly the decision of our Court of Appeal in Wall v. Horn Abbot Ltd. (1999), 175 N.S.R. (2d) 96, which is a decision written by the Honourable Justice Thomas Cromwell. I have also considered an earlier decision of the Honourable Justice Doane Hallett when he was a member of the Trial Division of the Nova Scotia Supreme Court in Pascoal & Filhos Limited v. Northland Fisheries Limited (1983), 58 N.S.R. (2d) 351, which dealt with a non-Nova Scotian company without assets in this Province. Lyn/Gor finds itself in an almost identical situation. It is neither a Nova Scotia company nor does it have any assets located in this province.
[16] The other decision I have considered is that of the Honourable Justice Pugsley of the Nova Scotia Court of Appeal in Motun (Canada) Ltd. v. Detroit Diesel-Allison Canada East, supra. This was also cited with approval in the Wall v. Horn Abbot, supra.
[17] As also stated previously, Lyn/Gor is no stranger to litigation. This was even recognized by Mr. Genge in his closing arguments. Although it appears that Lyn/Gor does honour its financial commitments, there are still a myriad number of court related matters still in progress. There is no evidence to suggest that Lyn/Gor is impecunious. Indeed, this was denied by Mr. Genge although he also said he is not sure and would not be until he meets with the company’s accountants in the next week or so. All Mr. Genge would say about the financial status of Lyn/Gor is that it has operated for a number of years and has survived. He also indicated that any award of security for costs could be felt by the company depending on how much the court might order.
[18] There was no suggestion that Lyn/Gor would not be able to proceed if security for costs is ordered. I have to be cognizant of this to ensure my order does not stifle the plaintiff’s litigation.
[19] After hearing and considering all the evidence presented and after listening to the arguments of counsel and Mr. Genge on behalf of Lyn/Gor, I feel this is a case that really demands an order for security for costs. My decision has nothing to do with the merits of the plaintiff’s actions. That is not something the court should even be concerned with unless, of course, the matter was entirely frivolous or vexatious. If it was, I am sure I would be dealing with an entirely different application to have the plaintiff’s actions dismissed.
[20] My decision relies mainly on the fact that the plaintiff is a non-Nova Scotian company without assets or any real physical presence in this province save for the times when it might be working on a project. That does not offer the security the defendants are entitled to should they successfully defend the actions taken against them by Lyn/Gor and assuming they are awarded costs.
[21] I will therefore order that Lyn/Gor post security for costs as follows: 1) to the Attorney General of Canada and Defence Construction Canada (1951) Limited an amount of $20,000.00 in total; to SGE Group Inc. an amount of $15,000.00; these amounts totalling $35,000.00 are to be paid within 60 days of today’s date.
[22] Regarding the application to have Mr. Genge declared ineligible to continue representing Lyn/Gor in these proceedings, clearly Civil Procedure Rule 9.08(2) states that a body corporate may commence, carry or defend a proceeding by a duly authorized officer resident in the province.
[23] I take this to mean exactly what it says. In order for Mr. Genge to act on behalf of Lyn/Gor he must reside in Nova Scotia. Clearly he does not. The cases of Fox v. Stirk et al., [1970] 3 All ER 7, Peat Marwick Thorne v. Munroe (A.A.) Enterprises Ltd. et al. (1994), 131 N.S.R. (2d) 214 (N.S.S.C.) and Snair v. Halifax Insurance Nationale-Nederlanden North America Corp. (1995), 145 N.S.R. (2d) 132 (N.S.S.C.) all help to define residence and in the case of Peat Marwick Thorne v. A.A. Munro, supra, it is clear that a duly authorized officer has to have residence in the Province in order to act on behalf of the company.
[24] The more recent decision of our Court of Appeal in Halifax (Regional Municipality) v. Ofume (2003), 213 N.S.R. (2d) 234 does recognize the authority of the court to make its own rules and control its own process. As such, there is an inherent jurisdiction to vary the rules if the situation warrants it. This is not a case where I feel inclined to relax the rule. Indeed, there is ample good reason to strictly enforce the rule.
[25] Consequently I am granting the applications brought by the Attorney General of Canada, Defence Construction Canada and the SGE Group prohibiting Mr. Genge from continuing to act on behalf of Lyn/Gor in these proceedings.
[26] It is uncertain where Mr. Genge’s residency might actually be. It is not up to the applicants or the court to guess. And certainly it is not the place where Mr. Genge might happen to find himself on any particular day. There has to be an element of permanency to it which is certainly not the case with Mr. Genge’s periodic stay-overs at a local motel/hotel. As the Honourable Justice Robertson said to Mr. Genge earlier, and it bears repeating, “A hotel just doesn’t cut it.”
[27] Based on the results of these applications and considering the protracted length of these proceedings, I will order costs payable by Lyn/Gor as follows: 1) to the Attorney General of Canada / Defence Construction Canada, collectively, the sum of $1,500.00; 2) to the SGE Group the sum of $1,500.00, all of which are payable within 30 days from the date of this decision. I would ask counsel for the applicants (either one, I will leave it to you to decide) to prepare the Order.
J.