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Appeals - Costs - Security for Costs (4)

. Rathod v. Chijindu

In Rathod v. Chijindu (Ont CA, 2024) the Ontario Court of Appeal considered appellate security for costs under R61.06:

[3] There is no automatic entitlement to security for costs of an appeal under r. 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Even when the criteria under r. 61.06 are met, a motion judge may refuse to make the order. In determining whether to exercise discretion to make the order, “the overarching principle to be applied to all the circumstances is the justness of the order sought”: see Yaiguaje et al. v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at paras. 18-19, citing Pickard v. London Police Services Board, 2010 ONCA 643, 268 O.A.C. 153, at para. 17.

[4] The moving parties rely on r. 61.06(1)(a), (b), and (c). As I shall explain, I am persuaded that it is just to order security for costs under r. 61.06(1)(a) and (c). Security for costs is not available here under r. 61.06(1)(b) because security could not have been ordered under r. 56.01 against the responding parties who were defendants in the proceeding because of the rationale that “no party should have to give security for costs as a condition of simply defending itself … and, in this regard, it can be said that an appeal is simply a step in the proceeding in which the defendant appealing is continuing to defend itself”: Donaldson International Livestock Ltd. v. Znamensky Selekcionno-Gibridny Center LLC, 2010 ONCA 137, 101 O.R. (3d) 314, at para. 13, citing to Toronto Dominion Bank v. Szilagyi Farms Ltd. (1988), 1988 CanLII 4745 (ON CA), 65 O.R. (2d) 433 (C.A.), per Morden J.A., at p. 440 (citations omitted).

[5] The moving parties have met the conjunctive criteria under r. 61.06(1)(a).

[6] First, there is good reason to believe that the appeal is frivolous and vexatious. As this court stated in Schmidt v. Toronto-Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.), at p. 6: “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”, as well as other factors, may all be relevant to determining whether there is good reason to believe that an appeal is frivolous and vexatious.

[7] The appeal appears frivolous. While the responding parties’ grounds of appeal allege various errors of law, at their core, they challenge the motion judge’s careful and thorough findings of fact and adverse findings of credibility made against them, which were open to her on the record. As the motion judge rightly found, the evidence supporting the moving parties’ claims was extensive, and the evidence submitted by the responding parties was “entirely untrustworthy and unreliable, such that it would be unsafe to rely upon any evidence presented by them, that is not corroborated by independent evidence, or the evidence of [the moving parties].” In my view, the responding parties’ appeal is doomed to failure.

[8] There is also good reason to believe that the appeal is vexatious in that the responding parties’ appeal is devoid of merit and appears to be brought for the collateral purpose of delaying payment to the moving parties. Moreover, the responding parties repeat their unfounded allegations of fraud and deceit against the moving parties and their lawyers, notwithstanding the motion judge’s findings that:

[The moving parties] overwhelmingly proved on the basis of the record, that [the responding parties] are not credible witnesses in this proceeding, have not provided reliable evidence, and further they have colluded with one another with the shared and common intent to defraud their mutual creditors, including [the moving parties], for their personal benefit.

[9] Second, there is good reason to believe that the responding parties have insufficient assets to pay the appeal costs. I reject the responding parties’ submission that there is sufficient surplus remaining after the mortgages are paid out to provide protection for the appeal costs. The amount of the moving parties’ mortgages, including accruing interest and costs (the outstanding costs orders and the trial costs orders), exceeds the amounts paid into court. Further, there is no evidence that the responding parties have any available assets to pay the appeal costs if they are unsuccessful. Indeed, the responding parties stated at para. 41 of their joint factum that the moving parties “rightly calculated that the appellants do not have cash at hand, therefore, cannot pay the $52,385.12 ‘security for costs’ they request.” They do not own the property at which they presently reside. Certainly, their failure to pay anything on the mortgages that they allowed to go into default and their failure to pay the outstanding costs orders substantiate that there is good reason to believe that they have insufficient assets to pay the appeal costs.

[10] If all the criteria under r. 61.06(1)(a) are not satisfied, security for costs may be granted “for other good reason” under r. 61.06(1)(c). The breadth of “for other good reason” is wide. In Henderson v. Wright, 2016 ONCA 89, at para. 27, Strathy C.J.O. explained that appellate courts have ordered security for costs “for other good reason” “when an appeal has a low prospect of success coupled with an appellant who has the ability to pay costs but from whom it would be nearly impossible to collect costs.” Consideration of these factors as “other good reason” does not duplicate the specific criteria under r. 61.06(1)(a) but “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”: Henderson, at para. 28.

[11] Here, if not frivolous and vexatious, the responding parties’ grounds of appeal have a very low prospect of success. Moreover, even if the responding parties have sufficient assets to pay appeal costs as they allege, their past failures to pay their mortgages and the outstanding costs orders demonstrate that they will not voluntarily pay appeal costs and that it will be “nearly impossible to collect” those costs.

[12] Following this court’s guidance in Yaiguaje, at para. 25, I step back “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.” In light of all the relevant circumstances that I have reviewed, I conclude that it is.

. Alami v. Haddad

In Alami v. Haddad (Ont CA, 2024) the Ontario Court of Appeal considered an appellate security for costs motion (by the respondent) under R61.06(1) ['Security for Costs of Appeal']:

[3] The respondent relies on r. 61.06(1)(a), (b), and (c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. He submits there is good reason to believe that the appellant’s appeal is frivolous and vexatious because it is devoid of merit, and she has insufficient assets to pay his costs of the appeal if she is unsuccessful. He highlights her failure to pay outstanding costs orders that are not related to her appeal. The respondent asks that the appellant be required to post $25,000 as security for his costs and pay the outstanding costs orders as a condition of her being permitted to continue with her appeal. He also requests that the matrimonial home be sold to comply with the order of the application judge.

[4] The criteria under r. 61.06(1)(a) are conjunctive: York University v. Markicevic, 2017 ONCA 651, at para. 33. The respondent must therefore satisfy all of the criteria: there is good reason to believe that the appellant’s appeal is frivolous and vexatious and that she has insufficient assets in Ontario to pay the costs of the appeal. I am not persuaded that there is good reason to believe the appellant’s appeal is frivolous and vexatious and that she has insufficient assets in Ontario to pay the appeal costs.

[5] Generally, a frivolous appeal is one devoid of merit and with little prospect of success; a vexatious appeal is one that is brought to annoy or harass, is conducted in a vexatious or “less than diligent” manner, or is pursued in bad faith or for an oblique purpose: Lavallee v. Isak, 2022 ONCA 290, at paras. 19, 25.

[6] The appellant’s main ground of appeal is that the application judge erred in ordering a resulting trust because the respondent did not contribute to the matrimonial home. As such, the appellant essentially challenges the application judge’s findings of fact about the respondent’s contributions without identifying errors in principle or palpable and overriding errors that would permit appellate interference. Given the deference generally owed to the application judge’s findings of fact, the appellant faces a stiff uphill battle on her appeal. The likelihood of the appellant’s appeal being successful is low. However, as her grounds are nevertheless arguable, I cannot say that the appeal is so devoid of merit that it is frivolous.

[7] Even if it were frivolous, I am not persuaded that there is good reason to believe that the appeal is vexatious: the appellant is exercising her right to appeal and has to-date conducted her appeal in accordance with the Rules; there is no evidence that she is bringing the appeal to annoy or harass the respondent, although he may feel annoyed or harassed by the fact of it; and there is no evidence that she is pursuing her appeal for a bad faith or oblique purpose.

[8] Nor am I convinced that there is good reason to believe that the appellant has insufficient assets in Ontario to pay the appeal costs. In accordance with Bruhn J.’s order, the appellant has at present a 50 percent interest in the matrimonial home. While the ongoing incurment of costs may erode it, there is no evidence that the equity of the home will not be sufficient to satisfy any appeal costs from the appellant’s share once the home is sold.

[9] Rule 61.06(1)(b) allows an order for security for costs of an appeal to be made if it could be made against the appellant under r. 56.01. In addition to the arguments made under r. 56.01(1)(e), which mirrors r. 61.06(1)(a), dealt with above, the respondent relies on r. 56.01(1)(c) because of the outstanding costs orders. However, Bruhn J. ordered that those costs be payable to the respondent from the appellant’s share of the proceeds from the sale of the matrimonial home. As a result, the respondent has the benefit of the protection provided by the appellant’s share of the home for the outstanding costs orders and, further, for the appeal costs if appeal costs are ordered in his favour.

[10] Rule 61.06(1)(c) allows an order for security for costs to be made “for other good reason”. Jamal J.A. (as he then was), sitting as a motion judge, explored what “other good reason” means in Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 23, as follows:

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 rr. 61.06(1)(a) or (b). [Citations omitted.]

[11] As Strathy C.J.O., sitting as a motion judge, observed in Henderson v. Wright, 2016 ONCA 89, 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.”

....

[13] It is well-established that an order for security for costs is discretionary. In addition to the criteria under r. 61.06(1) that I have just reviewed, I must also step back and consider whether it is just to order security for costs in the circumstances of this case and the interests of justice: Thrive Capital Management Ltd. v. Noble 1324 Queen Inc., 2021 ONCA 474, 156 O.R. (3d) 551, at para. 17. Consideration of these issues requires me to heed the caution of this court in Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, 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”.

. Hevey v. Hevey

In Hevey v. Hevey (Div Court, 2024) the Divisional Court considered a novel argument on an appellate 'security for costs' matter, here that the trial level costs were 'automatically stayed' [under RCP 63.01(1)]:

(b) Stay of $15,000 because appeal filed

[21] The appellant contends that the motion judge failed to consider that the interlocutory orders and the findings of contempt made against him had been appealed and were pending. More specifically, the appellant submits that with the delivery of his notice of appeal dated June 28, 2023, respecting the November 29, 2022 order of Desotti J., the costs order of $15,000 made therein was automatically stayed pursuant to Rule 63.01(1) of the Rules of Civil Procedure. That rule states that an appeal “from an ... order stays ... any provision of the order for the payment of money, except a provision [relating to a support order]”. As a result, the motion judge should not have considered the costs order to be “unpaid” under Rule 56.01(1)(c), and the $15,000 amount should not have been included as a term of the Order.

[22] In his reasons, the motion judge indicated that the respondent sought security for costs of the appeals in the amount of $152,840.09, which included payment of prior costs awards in the family litigation and the commercial proceeding, as well as $50,000 security for costs of the appeal: at para. 8.

[23] With respect to the costs order of $15,000, I accept that that award was technically stayed at the time of the hearing before the motion judge by virtue of Rule 63.01(1), since the appellant had served his notice of appeal prior to the said hearing. However, the granting of security for costs is discretionary. Rule 61.06(1) specifically gives the motion judge jurisdiction to award security for costs of the appeal that includes costs awarded in the proceedings below. There is nothing prohibiting the court from ordering costs that had been awarded below pending the appeal if it is in the interests of justice that such security be ordered: see Aegis Biomedical Technologies Ltd. v. Jackowski (1996), 1996 CanLII 952 (ON CA), 28 O.R. (3d) 558 (C.A.), at paras. 9-10.

[24] The motion judge recognized that security for costs orders are not to be made routinely: at para. 22. In this case, though, he found that it was in the interests of justice that security for costs be ordered, including the payment of certain costs ordered below. I am not persuaded that he made an error in principle in so finding. In exercising his discretion, the motion judge made findings supported by the evidence and applied the principles set out in Rule 61.06 and the related jurisprudence. I see no reason to interfere with his finding.

. Hevey v. Hevey [dismissal

In Hevey v. Hevey (Div Court, 2024) the Divisional Court considered the court's authority to dismiss a proceeding, here after an appellate order for security has not been complied with [under RCP 61.06(2)]:

(a) Jurisdiction to impose a dismissal of appeals

[19] The appellant submits that the motion judge did not have jurisdiction to impose a date by which the Divisional Court appeals would be dismissed failing payment of the costs orders or posting of security. He argues that Rule 61.06(2) of the Rules of Civil Procedure provides that an appeal may only be dismissed by way of a separate motion before a judge of the appellate court, in the event an appellant fails to comply with a security for costs order. The appellant says that the respondent did not seek an order before the motion judge that the appeals be dismissed in the event that any security or outstanding costs were not paid; and no submissions were made by the parties regarding a date by which the appeals would be dismissed if the amounts were not paid. He asserts that no grounds exist for an order that costs in the commercial action first be paid, as a condition for the Divisional Court appeals to be heard. The appellant submits that he will be unable to make the required payment within 30 days and, as a result, his appeals will be improperly dismissed.

[20] I do not agree that the motion judge lacked jurisdiction to direct that the appeals shall be dismissed if the payments are not made within 30 days. The motion judge had the power to make such an order by application of the Rules of Civil Procedure. Rule 61.06(1) provides that, on a motion for security for costs, the judge may make such order “as is just”. Rule 56.04, which applies with necessary modifications, provides that the amount and form of security and the time for paying shall be determined by the court. In any event, I am satisfied that the language used by the motion judge does not direct an automatic dismissal by the registrar of the appellant’s appeals. If the appellant fails to comply with the security for costs order, Rule 61.06(2) still requires the respondent to bring a motion to dismiss the appeal, as counsel for the respondent acknowledged before us. The appellant’s complaints about his inability to make the payments directed by the Order can be taken up with the judge hearing any motion to dismiss the appeals.