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Appeals - Security for Costs
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. Gauthier Estate v. White
In Gauthier Estate v. White (Ont CA, 2022) the Court of Appeal considered a motion for securty for costs on an appeal [R61.06]:[1] The moving party, who is the respondent on the appeal, brings a motion for security for costs on a pending appeal pursuant to r. 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. For the reasons below, the motion is granted.
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Discussion
[10] Rule 61.06 of the Rules of Civil Procedure provides that the court may order security for costs in specified circumstances:(1) In an appeal where it appears that,
(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;
(b) an order for security for costs could be made against the appellant under rule 56.01; or
(c) for other good reason, security for costs should be ordered,
a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just. [11] In Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 23, this court stated that, besides considering the specific factors in rr. 56 and 61, before making an order for security for costs, courts should consider whether “the justness of the case demands it.” In making this determination, as held at para. 25 of Yaiguaje, “each case must be considered on its own facts…. The correct approach is for the court to consider the justness of the order holistically, examining all the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.”
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[14] The test under r. 61.06(1)(a) is conjunctive. The moving party must show that there is reason to believe that the appeal is frivolous and vexatious and that the responding party has insufficient assets in Ontario.
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(3) There is other good reason to make an order for security for costs
[20] On a motion for security for costs pending appeal, pursuant to r. 61.06(1)(c), the court has a residual discretion to make an order for security for costs where there is good reason to make such an order. One of the circumstances where the court may exercise this discretion is where the appeal has a low prospect of success, and the appellant could pay costs but it would be “nearly impossible” for the respondent to collect those costs: Henderson v. Wright, 2016 ONCA 89, 345 O.A.C. 231, at para. 27. As Strathy C.J.O., as he then was, stated in Henderson, at para. 28, “[t]his ‘good reason’ balances the need to ensure an appellant is not denied access to the courts, with the respondent’s right to be protected from the risk the appellant will not satisfy the costs of the appeal”.
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[24] ... As held in Henderson, at para. 24, a party should not be able to rely on illiquid assets with a questionable market value to defeat a motion for security for costs. ... . Buduchnist Credit Union Limited v. 2321197 Ontario Inc.
In Buduchnist Credit Union Limited v. 2321197 Ontario Inc. (Ont CA, 2022) the Court of Appeal considers it's jurisdiction regarding security for costs on appeal under R61.06(1)(b):F. Should an order be made requiring TC to pay security for costs?
[52] BCU moved for an order for security for costs pursuant to r. 61.06(1)(b) of the Rules, in the event that I make the orders I have made. Rule 61.06(1)(b) authorizes me to make an order for security for costs that could be made against an appellant under r. 56.01. I cannot make the order requested. BCU was the applicant in the proceeding in which the order under appeal was made, namely, BCU’s distribution motion. A respondent in an appeal, such as BCU, may only rely upon r. 61.06(1)(b) where it was not the applicant below, but BCU was the applicant below. This limitation is intended to prevent imposing security for costs orders on impecunious parties who were forced into court: Diversitel Communications Inc. v. Glacier Bay Inc. (2004), 2004 CanLII 11196 (ON CA), 181 O.A.C. 6 (C.A.), at para. 8. Although TC became a party because it took the initiative of objecting to the requested distribution order, it was responding to proceedings initiated by BCU. A security for costs order against TC would not be fitting, nor in the interests of justice.
[53] In any event, I would not make the order sought. TC allegedly became insolvent because of the same fraud that it is seeking to remedy through its proposed appeal. It would not be in the interests of justice to rely on the insolvency of a party that arose because of a civil wrong as a basis for imposing a security for costs order that could have the effect of preventing that party from effectively remedying that civil wrong. I appreciate that BCU was not a party to the alleged fraud, but on the evidence before me, it may have participated in financial dealings with a perpetrator of the alleged fraud that have enabled that perpetrator to dissipate his assets, thereby frustrating recovery. . Ducharme Estate v. Thibodeau
In Ducharme Estate v. Thibodeau (Ont CA, 2022) the Court of Appeal considered a motion for security for costs of an appeal under R61.06(1)(a):[5] In the motion before me, Mr. Ducharme is seeking security for costs against Ms. Thibodeau pursuant to r. 61.06(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. I am persuaded that the preconditions of r. 61.06(1)(a) are satisfied and that it is just to make a security for costs order in the circumstances of this case.
[6] First, there is ““good reason” to believe that the appeal appears to be devoid of merit”: Health Genetic Center Corp. (Health Genetic Center) v. New Scientist Magazine, 2019 ONCA 576, at para. 10. Ms. Thibodeau is appealing the very order that she conceded below, and she is doing so without any evidentiary record having been placed before the application judge to support a challenge to the validity of the will. She argues that notwithstanding the withdrawal of her Notice of Objection, the application judge erred by failing, before granting probate, to initiate his own inquiry into her allegation that Brian had provided instructions before his death to a lawyer to alter the will, which the lawyer negligently failed to carry out. Mr. Ducharme argues, to the contrary, that even if a lawyer had failed to carry out such instructions, a remedy might be available against the lawyer, but such episode would have no effect on the validity of the will. Mr. Ducharme further submits that an application judge would have no obligation to inquire into an allegation that would not bear on the issues before them, and therefore no obligation to inquire into Ms. Thibodeau’s allegation, particularly not after she abandoned her opportunity to provide supporting evidence. Mr. Ducharme’s arguments provide considerable support for his submission that there is good reason to believe that the appeal appears to be devoid of merit.
[7] Secondly, “there is something that supports the conclusion that the appeal is “vexatious””: Health Genetic Center Corp., at para. 11. The substantive appeal appears to be so bereft of merit that there is reason to believe that the decision to bring it may have been a vexatious strategy to advance a costs appeal without having to seek leave to appeal costs, which is rarely granted.
[8] Moreover, Ms. Thibodeau is conducting related litigation against the solicitor who Brian allegedly instructed to amend his will. She has already made widescale unsupported allegations of invalidity in the Notice of Objection which delayed probate of a will that, if fulfilled, would distribute property she believes should be hers. Now she is bringing an apparently frivolous appeal that she believes, based on the submissions in her factum, will delay the distribution of the estate assets even without a stay. There is therefore reason to believe that she has advanced this appeal to delay distribution while she conducts related litigation against Brian’s solicitor.
[9] Mr. Ducharme has therefore satisfied me that the “frivolous and vexatious” precondition in r. 61.06(1)(a) is met.
[10] I am also satisfied that the precondition in r. 61.06(1)(a) relating to the insufficiency of assets in Ontario has been met. Ms. Thibodeau is not a resident of Ontario and has no registered property in Essex County where she formerly resided. Nor has she presented evidence contesting Mr. Ducharme’s claim that she probably does not have property in Ontario.
[11] I can therefore make a security for costs order pursuant to r. 61.06(1)(a), and I am persuaded that I should. Making a security for costs order is just for the reasons identified and would not be unjust to Ms. Thibodeau. She acknowledges owning property in New Brunswick. With the aid of legal representation, she also initiated the Notice of Objection that I have described. And she is maintaining a separate action against Brian’s former lawyer. She therefore does not appear to be impecunious or incapable of maintaining the costs of this litigation such that an order for security for costs would serve as an impediment to access to justice. . Lavallee v. Isak
In Lavallee v. Isak (Ont CA, 2022) the Court of Appeal awarded security for costs on an appeal:Security for costs
[15] This motion is brought pursuant to rule 61.06(1)(a) and (c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provide as follows:In an appeal where it appears that,
(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal; …
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(c) for other good reason, security for costs should be ordered,
a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just. [16] The ordering of security for costs is discretionary and not routine. It involves the consideration of the criteria under rule 61.06(1) and requires the overarching assessment of whether it would be just to order security, having regard to the particular circumstances of the case and the interests of justice: Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 418 D.L.R. (4th) 679, at paras. 18-19, 22. As court further noted in Yaiguaje, at para. 25, as each case must be considered on its own facts, “[i]t is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness for a security for costs order”.
(i) Rule 61.06(1)(a)
[17] I agree that the provisions of rule 61.06(1)(a) are met. As earlier noted, it is conceded that Ms. Isak has insufficient assets to pay the Lavallees’ costs. Moreover, there is good reason to believe that Ms. Isak’s appeal is frivolous and vexatious.
[18] I am not required to determine that Ms. Isak’s appeal is frivolous and vexatious; I must only be satisfied that there is good reason to believe that it is: Schmidt v. Toronto Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.), at para. 16. Relevant factors to be considered in my analysis include those set out in the following oft-cited passage from Schmidt, at para. 18:The apparent merits of the appeal, the presence or absence of an oblique motive for the launching of the appeal, and the appellant’s conduct in the prosecution of the appeal will be relevant to a determination of whether there appears to be good reason to believe that the appeal is frivolous and vexatious. No doubt, in specific cases, other factors will also be relevant. [19] The interpretation of “frivolous and vexatious” is not defined under the Rules of Civil Procedure or the Courts of Justice Act, RSO 1990, c C.43 nor has any rigid categorization arisen in the case law. Judicial treatment of these terms is however consistent. A “frivolous” appeal has been interpreted as meaning one “readily recognizable as devoid of merit, as one having little prospect of success”: Pickard v. London Police Services Board, 2010 ONCA 643, 268 O.A.C. 153, at para. 19. A “vexatious appeal” includes one taken to “annoy or embarrass the opposite party” or conducted in a “less than diligent” or “vexatious” manner: York University v. Markicevic, 2017 ONCA 651, at para. 33; Henderson v. Wright, 2016 ONCA 89, 345 O.A.C. 231, at para. 20; Pickard, at para. 19; Schmidt, at para. 20. This may include “an oblique motive for launching the appeal”, such as “to harm a party or delay the proceedings or a given result”: Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 10; Schmidt, at para. 20; York University, at paras. 33-34. It also may include a failure to comply with the rules, court orders and costs orders, including filing out of time and only when forced to: Pickard, at para. 25; Schmidt, at para. 20; York University, at para. 36; Henderson, at para. 20.
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(ii) Rule 61.06(1)(c)
[30] If I am wrong in my analysis and conclusion with respect to rule 61.06(1)(a), I am of the view that the Lavallees are entitled to security for costs under rule 61.06(1)(c) which, as noted above, provides that security may be ordered for “other good reason”.
[31] Jamal J.A. (as he then was), sitting as a motion judge, explored what “other good reason” means in Heidari, at para. 23:Although the list of reasons justifying security under this residual category is not closed, the “other good reason” must be: (1) consistent with the purpose for ordering security – namely, that the respondent is entitled to a measure of protection for costs; and (2) fairly compelling, because the residual category is only engaged where the respondent cannot meet the requirements of rules 61.06(1)(a) or (b). [Citations omitted.] [32] As this court observed in Henderson, at para. 28, the “other good reason” criterion “balances the need to ensure an appellant is not denied access to the courts, with the respondent’s right to be protected from the risk the appellant will not satisfy the costs of the appeal.”
[33] In my view, there are compelling reasons here to order security for costs.
[34] For the reasons earlier noted, I am of the view that the appeal is without merit. As Ms. Isak concedes that she does not have sufficient assets to satisfy the Lavallees’ costs, it will prove practically impossible for them to compel payment of their costs. There is no evidence, however, that Ms. Isak does not have any means to pay costs.
[35] In balancing the equities here, I am mindful of this court’s caution in Yaiguaje, at para. 23, that “[c]ourts must be vigilant to ensure an order that is designed to be protective in nature is not used as a litigation tactic to prevent a case from being heard on its merits”. That is not the case here. . Thrive Capital Management Ltd. v. Noble 1324 Queen Inc.
In Thrive Capital Management Ltd. v. Noble 1324 Queen Inc. (Ont CA, 2021) the Court of Appeal considered a security for costs motion in an appeal:The Motion for Security for Costs
[15] Rule 61.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides:In an appeal where it appears that,
(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;
(b) an order for security for costs could be made against the appellant under rule 56.01; or
(c) for other good reason, security for costs should be ordered,
a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just. [16] The respondents seek security for costs as follows: $25,000 for the appeal and $193,971.08 for the proceeding. The latter sum is the total of the three costs awards included in the judgment.
[17] The ordering of security for costs is discretionary; a two-step reasoning process is involved. The first question is whether the requirements of r. 61.06(1)(a), (b), or (c) are met. If so, the second question is whether it would be just to order security, considering the circumstances and the interests of justice: Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at paras. 18-19.
[18] The respondents rely on r. 61.06(1)(c) which provides that security may be ordered for “other good reason”. This phrase must be understood in the context of the rest of r. 61.06(1). Subrule (a) contemplates security being ordered where the appeal appears to be frivolous and the appellant has insufficient assets in Ontario to pay the costs of the appeal. Subrule (b) contemplates security where an order could be made against the appellant under r. 56.01, the rule that governs when security may be ordered against a plaintiff at the trial level. Resort to subrule (c) is made where the other subrules do not apply. Invoking it should not be routine: Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, 268 O.A.C. 172, at para. 8.
[19] The list of what might qualify as an “other good reason” is not closed. But the reason must be (i) compelling, and (ii) related to the purpose of ordering security, which is to provide a respondent with a measure of protection for costs: Combined Air, at para. 8; Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 6.
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[23] An “other good reason” to order security has been found in cases where misconduct is such as to present an unacceptable risk that any costs order made on the appeal will not be obeyed. For example, in York University v. Markicevic, 2017 ONCA 651, at para. 58, Epstein J.A. considered that, “a finding that the appellant has committed fraud…in conjunction with a finding that the appellant has taken steps to put his assets out of the reach of his creditors, provide ‘other good reason’ to justify an order for security for costs under r. 61.06(1)(c).”
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[25] Having concluded that the respondents have met the requirements of r. 61.06(1)(c):I must go on to determine whether an order for security for costs would be just. Such a determination requires balancing the [appellants’] right to access to justice against the [respondents’] right to protection from having to defend unmeritorious positions in circumstances in which it is unlikely to recover its costs: Markevic, at para. 22. . Betser-Zilevitch v. Petrochina Canada Ltd.
In Betser-Zilevitch v. Petrochina Canada Ltd. (Fed CA, 2021) the Federal Court of Appeal considered a motion for security for costs in a federal appeal, when the costs below had not been yet assessed:[9] It does not appear that this Court or the Federal Court has ever considered the question whether an order can be made under rule 416(1)(f) before the costs said to be unpaid have been assessed. However, case law in other jurisdictions, including jurisdictions whose security for costs rules include an equivalent to rule 416(1)(f), supports the appellant’s position.
[10] In Tricontinental Investments Co. v. Guarantee Co. of North America (1989), 1989 CanLII 4140 (ON CA), 70 O.R. (2d) 461, 17 A.C.W.S. (3d) 496 at 6-7, the Court of Appeal for Ontario addressed the meaning of rule 56.01(1)(c) of the Rules of Civil Procedure, R.R.O., Reg. 194, which, in terms very similar to those of rule 416(1)(f), authorizes an order for security for costs where "“the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part.”" It held that rule 56.01(1)(c) does not apply where costs have not yet been assessed. Until assessment, it stated, an order for costs that forms part of a judgment at trial cannot be said to "“remain unpaid.”" The Court also queried how a plaintiff could be expected to pay costs when their quantum has not been ascertained. Orkin on the Law of Costs cites this case as authoritative: Mark M. Orkin & Robert G. Schipper, Orkin on the Law of Costs, 2nd ed (Toronto: Thomson Reuters Canada Ltd, 2020) (loose-leaf, release 2021-1), ch 5 at 5-30.
[11] Similarly, in Johnston v. Montreal Trust Company of Canada, 1993 CanLII 2913 (PE SCTD), 40 A.C.W.S. (3d) 680 at 6-7, the Prince Edward Island Supreme Court Trial Division dealt with rule 56.01(c) of the P.E.I. Rules of Civil Procedure, which was then cast in the same terms as those of Ontario rule 56.01(1)(c). The Court held that it would be premature, when the costs for which security was sought had not yet been taxed, to say that the circumstances required by the rule – that costs ordered in the same or another proceeding remain unpaid – were in existence.
[12] In British Columbia, the authority of the Court of Appeal to order security for costs awarded at trial is found in section 10(2)(b) of the Court of Appeal Act, R.S.B.C. 1996, c. 77, which authorizes interim orders "“to prevent prejudice to any person.”" In E.B. v. British Columbia (Child, Family and Community Services), 2020 BCCA 263 at paras. 27-28, the Court of Appeal for British Columbia referred to "“the usual practice of the Court”" as being to require that trial costs be assessed and certified before an order for security for costs will be made. The Court added that "“[w]hile there will be cases where the evidence of prejudice is so great that it will be in the interests of justice to award security for trial costs before the amount of those costs is known, […] the preferable practice in most cases is to wait until costs are assessed before ordering security for them.”"
[13] In both Lu v. Mao, 2006 BCCA 560 at para. 19, and Hammond v. Hammond, 2018 BCCA 399 at para. 12, the Court of Appeal for British Columbia found it premature to order security for the costs of the proceeding in the court below when those costs had not yet been assessed.
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[17] I appreciate that in this case, the directions given by the trial judge will account for a large proportion of the total amount ultimately payable once the assessment has been completed. But that will not always be so. And this issue will not of course arise when the trial judge actually fixes costs, rather than giving directions to the assessment officer. Once costs are fixed or assessed, it is incumbent on the party obliged to pay them to address them promptly, or risk a motion for security for costs: Safe Gaming System Inc. v. Atlantic Lottery Corporation, 2018 FCA 180 at paras. 8-9. . Shaver-Kudell Manufacturing Inc. v. Knight Manufacturing Inc.
In Shaver-Kudell Manufacturing Inc. v. Knight Manufacturing Inc. (Ont CA, 2021) the Court of Appeal considered an issue of security for costs (here for lack of merit) in an appeal [under R61.06(c) "other good reason"]:[35] An order for security for costs may be made under r. 61.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, where (a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal; (b) an order for security for costs could be made against the appellant under r. 56.01; or (c) for other good reason. Rule 61.06(1) is permissive, not mandatory. In determining whether an order should be made for security for costs, the “overarching principle to be applied to all the circumstances is the justness of the order sought”: Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 19.
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[38] To grant security for costs under r. 61.06(1)(c), the “other good reason” must be compelling. Resort is to this provision when the respondent has been unable to obtain security under the other two categories, and security for costs under r. 61.06(1)(c) should not be made routinely: Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, 268 O.A.C. 172 (In Chambers), at para. 8. Security for costs has been awarded under this provision where an appeal has a low prospect of success and the appellant has the ability to pay costs, but it would be nearly impossible to collect such costs: Perron v. Perron, 2011 ONCA 776, 286 O.A.C. 178 (In Chambers), at para. 23; Henderson v. Wright, 2016 ONCA 89, 345 O.A.C. 231 (In Chambers), at para. 27. Other examples include circumstances where there has been a finding that the appellant committed fraud, particularly if coupled with a finding that the appellant took steps to put his assets out of the reach of his creditors: York University v. Markicevic, 2017 ONCA 651 (In Chambers), at para. 58.
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