Marine Ventures Inc. v. Visual Knowledge Software Inc.

2011 BCSC 1668 Marine Ventures Inc. v. Visual Knowledge Software Inc. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Marine Ventures Inc. v. Visual Knowledge Software Inc., 2011 BCSC 1668 Date: 20111206 Docket: S20955 Registry: Chilliwack Between: Marine Ventures Inc. and Caracasa Games Inc. Plaintiffs And Visual Knowledge Software Inc. doing business as Visual Knowledge Inc. and Conor George Shankey Defendants Before: Master MacNaughton Reasons for Judgment Counsel for the Plaintiffs: Lawrence S. Smith Counsel for the Defendants: Mark R. Hamilton Place and Date of Hearing: Chilliwack, B.C. November 23, 2011 Place and Date of Judgment: Vancouver, B.C. December 6, 2011 [1] The defendants applied for a number of orders, three of which proceeded on consent. The contentious applications were to: a. strike out the claims in the Amended Notice of Civil Claim against Conor George Shankey; b. compel responses to questions asked at the examination for discovery of the plaintiffs' representative; and c. require the plaintiff to post security for costs in the amount of $45,000 and to stay this action until the security is posted. The background to these applications [2] Marine Ventures Inc. ("Marine") is the owner of the name, brand, design, and data associated with a computer game called Treasure Hunt. Marine has licensed the intellectual property in Treasure Hunt for use to Caracasa Games Inc. ("Caracasa"). In their Amended Statement of Claim, Marine and Caracasa allege that Marine and the defendants Visual Knowledge Software Inc. ("Visual") and Mr. Shankey entered into both written and oral agreements for the development of Treasure Hunt as a video game playable on-line. Marine and Caracasa allege breaches of contract, negligent misrepresentations, and unjust enrichment. It seeks damages. Visual denies the claims. Should the claims against Mr. Shankey be struck out? [3] The defendants apply to strike out the claim against Mr. Shankey under Rule 9‑5(1)(a) on the basis that it discloses no reasonable cause of action. Rule 9‑5(2) provides that no evidence is admissible on an application under subrule (1)(a). It is the pleadings themselves that are reviewed. [4] In this case, a review of the Amended Statement of Claim indicates that Mr. Shankey was identified a principal of Vision. The only allegations made against him as a defendant are with respect to the claims of misrepresentation and his name has simply been added to all of the misrepresentation allegations earlier made against Visual. There are no specific allegations of independent misrepresentations made by Mr. Shankey, and relied on by Marine and Caracasa, and there are no additional damages claimed against him. Further, there are no allegations that Mr. Shankey acted in an individual capacity separate and apart from his role with Visual. [5] As the Court of Appeal said in The Owners, Strata Plan No. VIS3578 v. John A. Neilson Architects Inc., 2010 BCCA 329: "[I]t is not enough to plead undifferentiated allegations against the corporation and its directors and employees...The further amended statement of claim does not set out material facts to support commission of an independent tort. The proposed amendments simply introduce the individuals as directors or employees of their corporate entities and then allege that they owed the same duties, committed the same breaches, and caused the same damages as their companies. Nothing in the pleading indicates why the corporate fail should be pierced to find liability on the part of these four individuals. (paras. 71-72) [6] In response to this application, and in his affidavit, Roger Taylor, the President, Director, and majority shareholder of both Marine and Caracasa, sets out the representations he says that Mr. Shankey made to induce Mr. Taylor to have his companies enter into a contract with Visual. Because it is only the pleadings that are examined on an application to strike, I cannot consider Mr. Taylor's affidavit evidence. There is no application before me to permit Marine and Caracasa to further amend their Statement of Claim. [7] In the absence of any basis on which Mr. Shankey could be held independently liable for the misrepresentations of Visual, and without any specific allegations against him personally, the Amended Statement of Claim discloses no reasonable cause of action against Mr. Shankey and is struck. Should Mr. Taylor be required to provide the names and addresses of the Caracasa shareholders? [8] During the examination for discovery of Mr. Taylor, as representative of Marine and Caracasa, counsel for Visual requested the names and addresses of the investors in Caracasa. Mr. Taylor has refused to provide that information on the basis that it is not relevant. [9] Visual submits that it is entitled to the names of the Caracas investors because it is reasonable to expect that they reviewed the Treasure Hunt game and have knowledge about it. Visual relies on Rule 7-2(18)(b) which provides that a person being examined for discovery can be compelled to give the names and addresses of all persons who reasonably might be expected to have knowledge relating to any matter in question in the action. [10] Marine and Caracasa submit that they have disclosed the documents which were presented to the investors and that the knowledge of individual investors about the game is not relevant to the issues in the action. In addition, they submit that disclosure of the investors' names would be prejudicial because it would "further damage Mr. Taylor's business reputation". [11] I am not satisfied, on the evidence before me, that the Caracasa investors might reasonably be expected to have knowledge of matters in question in the action. The matters in question in the action are with respect to alleged misrepresentations inducing a contract, breaches of contract, unjust enrichment, and resulting damages. The pleadings do not suggest that the Caracasa shareholders were involved in any of the discussions which led to the contract nor that they were involved in the events which led to this dispute. [12] As a result, I conclude that Mr. Taylor is not required to provide the names and addresses of the Caracasa shareholders. Should the Marine and Caracasa be required to provide security for costs and should the action be stayed until security is posted? [13] Visual seeks security for its costs under s. 236 of the Business Corporations Act, S.B.C. 2002, c. 57 which provides that the court may require security for costs, and stay a proceeding until the security is given, where a corporation is a plaintiff in a proceeding and it appears that the corporation will be unable to pay a successful defendants' costs. [14] The parties agreed that the applicable principles when considering orders for security for costs are set out in the Court of Appeal's judgment in Kropp v. Swaneset Bay Golf Course., 29 B.C.L.R. (3d) 252 as follows: 1. The court has a complete discretion whether to order security, and will act in light of all the relevant circumstances; 2. The possibility or probability that the plaintiff company will be deterred from pursuing its claim is not without more sufficient reason for not ordering security; 3. The court must attempt to balance injustices arising from use of security as an instrument of oppression to stifle a legitimate claim on the one hand, and the use of impecuniosity as a means of putting unfair pressure on a defendant on the other; 4. The court may have regard to the merits of the action, but should avoid going into detail on the merits unless success or failure appears obvious; 5. The court can order any amount of security up to the full amount claimed, as long as the amount is more than nominal; 6. Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled; and 7. The lateness of the application for security is a circumstance which can properly be taken into account. [15] Applying those principles to this case, I find the following. [16] Marine and Caracasa have not filed any evidence to suggest that they would be deterred from pursuing their claim if an order for security for costs were made. I cannot conclude that a valid claim would be stifled. [17] Success or failure of the claim is not obvious on the pleadings. [18] As confirmed by corporate, Personal Property Registry, and Land Title searches, Marine is an Alberta company which has no B.C. assets. During his examination for discovery, Mr. Taylor indicated that Marine did not have any real property, had no significant personal property assets and no outstanding debts. It owns the intellectual property associated with the Treasure Hunt game. Mr. Taylor indicated that the intellectual property was just the concept of the game. [19] In his responding affidavit to this application, Mr. Taylor corrects his discovery evidence and says that Marine owns a share in a small shopping mall in Alberta. He indicated that Marine has $61,568 invested in that shopping mall. The evidence before me does not disclose what that investment is currently worth. He also says that Marine has $1,065.52 in cash. A review of Marine's financial statements indicates that it operated at a loss in 2010. [20] Further, as confirmed by corporate, Personal Property Registry and Land Title searches, Caracasa is a B.C. company which has no registered assets. In his affidavit, Mr. Taylor says that it has $1,556.98 in cash. [21] This application was brought late in these proceedings, five and a half months prior to trial. Visual submits that there have been long periods of time during which almost no steps were taken. Mr. Taylor was examined for discovery on October 18, 2011 and it was during those discoveries that Visual says it learned of the financial situation of both Marine and Caracasa and became concerned about their ability to pay its costs if Visual is successful in its defence. It brought this application shortly thereafter. Counsel for Marine and Caracasa submits that they may have conducted this litigation differently if this application had been brought earlier and that the searches which indicate that neither company has B.C. assets were always available to Visual. It did not need to wait for the examination of Mr. Taylor. [22] I conclude that, apart from Marine's investment in the Alberta shopping mall, neither Marine nor Caracas has sufficient other assets to satisfy Visual's costs after trial. [23] While it is possible that Marine and Caracasa would have conducted this litigation differently had the application for security been brought earlier, there is no evidence on which I could reach that conclusion. [24] In all the circumstances, I am satisfied that an order for security for costs is warranted. Visual has filed a draft bill of costs for the conduct of this litigation to date. It is based on costs at Tariff Scale B and on a set number of units for each step in the litigation through to the end of the scheduled 15-day trial and actual disbursements to date. That bill of costs totals $42,570.11. Counsel submits that an order for security in the amount of $45,000 should be made because of the additional disbursements that Visual will incur until Trial. The bill of costs appears reasonable. [25] However, I am not satisfied that security in the amount of $45,000 is appropriate in this case because, although there is some uncertainty about the value of Marine's investment in the shopping mall, I conclude that it has some value. Without evidence, I have assigned the investment a value of $30,000, less than half of the amount invested. I therefore order Marine and/or Caracasa to post security for Visual's costs in the amount of $15,000 and stay this action until it is posted. Conclusion [26] I have struck out the claims against Mr. Shankey, dismissed the application to compel the names and addresses of the Caracasa shareholders, ordered Marine and Caracasa to post security for Visuals costs in the amount of $15,000, and stayed the action until the security is posted. [27] Counsel did not make submissions on the costs of this application and, in light of the mixed success, may decide that they do not wish to do so. If the parties wish to make costs submissions they should arrange to do so through the Registry. "Master MacNaughton"