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Appeal - Security for Costs (3). Hevey v. Hevey
In Hevey v. Hevey (Div Court, 2024) the Divisional Court considered security of cost orders on an appeal, here walking through the RCP 61.06 tests for this:[6] Ordering security for costs under Rule 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 is permissive, not mandatory. In an appeal, there is no entitlement as of right to an order for security for costs. Even where the requirements of the rule have been met, a motion judge has discretion to refuse to make the order. It involves the consideration of the criteria under Rule 61.06(1) and an assessment of whether it would be just to order security in the circumstances of the case and the interests of justice. A decision on security for costs is entitled to deference: see Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at paras. 18-20; Susin v. Susin, 2018 ONCA 220, at para. 10.
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Discussion
[13] In his reasons, the motion judge correctly identified the applicable rule as being Rule 61.06 of the Rules of Civil Procedure. He applied this rule, its jurisprudence and legal test on the motions before him. Rule 61.06(1) reads:61.06 (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. [14] The motion judge noted that, in light of the fact that leave to appeal had been granted, the appeal could not be considered frivolous or vexatious under Rule 61.06(1)(a). But he went on to explain why several of the factors in Rule 56.01 did apply, including that: the appellant resides in Florida and so is ordinarily resident outside of Ontario; the appellant has unpaid orders for costs made against him totalling $102,840.09; and there is good reason to believe that the appellant has insufficient assets in Ontario to pay the costs since (i) he owns no property in Ontario, and (ii) the funds being held in trust in the commercial action are being held in trust to the credit of that dispute and no determination has been made that such funds belong to the appellant. Those findings were open to the motion judge to make based on the record before him.
[15] The motion judge also took into account whether there was “other good reason” that security for costs should be ordered. Again, he correctly identified the legal test, including that he, as the motion judge, must “take a step back” and consider the justness of the order sought: see Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756.
[16] In analyzing the circumstances of the case before him, the motion judge considered not only findings made by other judges concerning the appellant’s conduct, but also that:(a) the appellant had not provided details of his financial situation to support the claim that he has limited access to funds such that he would be prevented from pursuing the appeals if he was ordered to post security for costs;
(b) the appeals were on interlocutory issues and would not finally resolve the proceeding; and,
(c) it would be appropriate and just to provide the respondent a “measure of protection” by way of an order for security for costs. The motion judge concluded that the criteria listed in Rule 56.01(1) applied and supported an order for security for costs. . Grillone (Re)
In Grillone (Re) (Ont CA, 2023) the Court of Appeal considered (and granted) a motion for security for costs on appeal, here where the respondent had failed to pay past cost orders:IV. SECURITY FOR COSTS
[62] As mentioned, Mr. Grillone has failed to pay Bluecore two cost awards totaling $10,000 made earlier this year by this court. In those circumstances, Bluecore is entitled to security for costs against Mr. Grillone pursuant to rr. 56.01(c) and 61.06(1)(b): Health Genetic Center Corp. v. New Scientist Magazine, 2019 ONCA 968, 59 C.P.C. (8th) 15, at para. 15. ... . Bank of Nevis International Limited v. Kucher
In Bank of Nevis International Limited v. Kucher (Ont CA, 2023) the Court of Appeal considered a security for costs on an appeal [under R56.01 and 61.06(1)] and on an 'underlying motion':[1] The respondents in this appeal move for security for costs under rr. 56.01 and 61.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They request an order that the appellant pay into court security for costs for the appeal in the amount of $25,000, and for the underlying motion in the amount of $50,000.
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[10] The test for granting security for costs is set out in rr. 61.06 and 56.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194:61.06 (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.
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(2) If an appellant fails to comply with an order under subrule (1), a judge of the appellate court on motion may dismiss the appeal. [Emphasis added.]
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56.01 (1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;
(c) 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;
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or
(f) a statute entitles the defendant or respondent to security for costs. [Emphasis added.] [11] In terms of methodology, it must first be determined whether the requirements of r. 61.06(1)(a), (b), or (c) are met; if so, the question is whether it is just to order security for costs, considering the circumstances 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; NDrive, Navigation Systems S.A. v. Zhou, 2022 ONCA 39, at paras. 8-11.
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[17] Accordingly, I order security for costs of $25,000 for the appeal, an amount that appears reasonable in all of the circumstances, including the nature of the appeal. Moreover, although security for the costs of an underlying proceeding is not ordered “routinely” (see Tsai v. Dugal, 2021 ONCA 170, at para. 15), the same factors identified in the preceding paragraph convince me that the order is justified in this case. The appellants will pay security for costs in the amount of $50,000, equal to the costs order of the motion judge. I note that this costs order was considerably less than the funds expended in defending this action and bringing it to an end before the motion judge.
[18] Balancing all factors, I direct the appellant to post security for costs for the appeal in the amount of $25,000, and for the underlying motion in the amount of $50,000, within 30 days of the release of these reasons. . Gill v. MacIver
In Gill v. MacIver (Ont CA, 2023) the Court of Appeal considers a motion for security for costs on an appeal [under RCP R61.06]:[1] The Pointer Group Incorporated moves for security for its costs of the appeal and its costs of the action and the anti-SLAPP motion below, under r. 61.06(1)(a) and (c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[2] For the reasons that follow, I am not satisfied that the moving party has met its onus to show that (1) there is good reason to believe that the appeal is frivolous and vexatious, and that Dr. Gill has insufficient assets to satisfy the costs of the appeal, or (2) there is other good reason to order security for costs. Nor am I persuaded that the justice of the case warrants such an order.
[3] The meaning of “frivolous and vexatious” under r. 61.06(1)(a) is not defined in the Rules of Civil Procedure but has been interpreted in the case law. A “frivolous” appeal includes an appeal “readily recognizable as devoid of merit, as one having little prospect of success”: Lavallee v. Isak, 2022 ONCA 290, at para. 19, citing 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, such as a failure to comply with court orders or the rules: Lavallee, at para. 19, citing Pickard, at para. 19, and Henderson v. Wright. 2016 ONCA 89, 345 O.A.C. 231, at para. 20.
[4] The moving party must show there is good reason to believe that the appeal is both frivolous and vexatious: York University v. Markicevic, 2017 ONCA 651, at para. 33. It has not done so. In her notice of appeal, Dr. Gill presents arguable errors of law in her grounds of appeal that apply to the moving party and all the other respondents remaining on this appeal, including that the motion judge fell into analytical error in misapplying the test and jurisprudence on an anti-SLAPP motion under s. 137.1 of the Courts of Justice Act and in misapplying the test for defamation. For the purposes of this motion, I do not have to determine whether these grounds will ultimately prevail but simply whether there is good reason to believe the grounds are frivolous. Moreover, even accepting the submission that the appeal, although not frivolous, is weak, there is no indication that Dr. Gill has conducted this appeal in a vexatious manner.
[5] With respect to the question of sufficiency of assets, there is no evidence respecting Dr. Gill’s financial circumstances other than she is still working as a physician and has recently paid her counsel $20,000 (corresponding to the amount the moving party seeks as security for costs of the appeal[1]), which is being held in trust in response to this motion. The fact that there was a very large costs award made against Dr. Gill is not, without more, a factor that indicates insufficiency of assets. The payment of the costs award was automatically stayed by the appeal pursuant to r. 63.01(1) of the Rules of Civil Procedure.
[6] Nor does Dr. Gill’s lack of response to the moving party’s request for information about her financial circumstances support its allegations of insufficient assets. It is the moving party’s onus to demonstrate first that there is good reason to believe Dr. Gill has insufficient assets to satisfy the costs of the appeal. It is only when the moving party satisfies that onus that the evidentiary burden to show sufficiency of assets to satisfy the costs of the appeal shifts to Dr. Gill to respond: Chemical Vapour Metal Refinishing v. Terekhov, 2016 ONSC 7080, at paras. 15-21. As the moving party failed to meet that onus, there was nothing to which Dr. Gill had to respond and therefore nothing can be taken from her lack of response.
[7] With respect to r. 61.06(1)(c), the criterion of “other good reason” is not specifically particularized under the rules but its meaning is explored in the case law. As Jamal J.A. (as he then was) stated in Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 23, “[a]lthough 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).” An example of where this court has ordered security under this subsection includes where the 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: see e.g., Henderson. There is no indication that it would be impossible or difficult to collect costs from Dr. Gill. I see no compelling circumstances here that would warrant the exercise of the court’s residual discretion. . Watson v. Herom
In Watson v. Herom (Ont CA, 2023) the Court of Appeal considered an appeal from a motion judge's order to grant security for costs on appeal:[4] The rule on security for costs on appeal is r. 61.06(1) of the Rules of Civil Procedure, R.R.O., Reg. 194. It states in part: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 … 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. [5] Applying r. 61.06(1)(a), the Motion Judge determined that there was good reason to believe the appeal was frivolous and vexatious. In addition, there was no dispute that the appellant lacked sufficient assets in Ontario to pay the costs of the appeal. Examining the overall justice of the case, the Motion Judge decided that it would be unfair for the respondent to bear the burden of the significant costs to respond to an appeal of doubtful merit without some security for her costs. The Motion Judge was mindful of the appellant’s restricted financial circumstances but was satisfied that the requested order was not being used as a litigation tactic to prevent the appeal from being heard on its merits. She reasoned that security for costs in the amount of $15,000 provided substantial protection to the respondent for her costs of the appeal without being a crushing amount for the appellant.
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[8] The Motion Judge applied the correct test for an order for security for costs on appeal and provided detailed reasons on the lack of merit in the underlying appeal. In addition, she noted that the appellant had provided scant information about the income she was able to generate and her ability to raise or borrow money to satisfy an order for security for costs.
[9] None of the arguments advanced by the moving party undermine the Motion Judge’s conclusions on the two prongs of r. 61.06(1)(a) and her assessment of the justice of the case. . Hevey v. Hevey
In Hevey v. Hevey (Div Court, 2023) the Divisional Court considered security for costs on appeal [under RCP R61.06, which adopts provisions of R56]:[21] Rule 61.06(1)(c) permits ordering security for costs for "other good reason." As Jamal J.A., as he then was, stated in Heidari v. Naghshbandi, 2020 ONCA 757, 153 OR (3d) 756, at para. 23, any "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).” Examples include where the appellant has committed fraud, or taken steps to put assets out of reach such that it may be very difficult to collect costs.
[22] I recognize that security for costs orders are not to be made routinely. As Jamal J.A. noted in Heidari at para. 6:Rule 61.06(1) requires a two-stage analysis: first, the respondent must show that they meet the terms of the rule; second, the motion judge must "take a step back" and consider the justness of the order sought in all the circumstances, with the interests of justice at the forefront….In considering the justness of the order sought, relevant factors include, but are not limited to, the merits of the appeal, any delay in moving for security for costs, the impact of actionable conduct by the respondent on the available assets of the appellant, access to justice concerns, the public importance of the litigation and the amount and form of security sought by the respondent….An order for security for costs is intended to provide ‘a measure of protection’ to the respondent for the costs to be incurred on the appeal, without denying the appellant a chance to pursue an appeal. …. The court must ensure that an order for security for costs is not used as a litigation tactic to prevent a case from being heard on its merits. [citations omitted] [23] As I have noted, three of the criteria listed in Rule 56.01(1) apply here and support an order for security. I am also influenced by the findings respecting James’ conduct in the litigation. He has been found to be in contempt of preservation orders. The audit of James’ assets appears to stem from his own lack of disclosure of assets in the proceedings. As put by Harvison Young J.A. in overturning the summary judgment initially obtained by James prior to providing financial disclosure, “[i]t is up to the party with the assets to make the disclosure and the valuation of assets”: Hevey v. Hevey, 2021 ONCA 740, at para. 34. The current appeals to this Court are about James’ financial disclosure.
[24] James’ conduct in the application to bring a derivative action was found to be tactical and not in good faith. Nicholson J. also expressed concerns with James’ conduct, including the improper withdrawal of funds from him. Desotti J. also expressed concern about delays caused by James in the equalization proceeding. . Hevey v. Hevey
In Hevey v. Hevey (Div Court, 2023) the Divisional Court considered a security for costs motion in a complex family court appeal [FCR R38], which adopts RCP R61.06 security for costs on appeal rules - which further adopts R56 of the RCP (trial security for costs). This messy configuration was further complicated by the involvement of a corporate derivative proceedings between the parties and unpaid past cost orders.
These quotes address which security for costs regime should apply:Applicable law
[10] A preliminary issue is whether the Family Law Rules or the Rules of Civil Procedure apply to this motion.
[11] Rule 38(1) of the Family Law Rules, O Reg 114/99, dealing with appeals to the Divisional Court and Court of Appeal, provides that Rules 61, 62 and 63 of the Rules of Civil Procedure, RRO 1990, Reg 194, apply to appeals to the Divisional Court. This includes Rule 61.06(1) governing security for costs, which states:(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. [12] Rule 56.01(1) of the Rules of Civil Procedure provides:(1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;
(c) 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;
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or
(f) a statute entitles the defendant or respondent to security for costs. [13] However, Rule 38(26) of the Family Law Rules provides for security for costs as well, stating:(26) On a motion by the respondent for security for costs, the court may make an order for security for costs that is just, if it is satisfied that,
(a) there is good reason to believe that the appeal is a waste of time, a nuisance, or an abuse of the court process 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 subrule 24 (13); or
(c) for other good reason, security for costs should be ordered. [14] Rule 24(13) of the Family Law Rules provides:(13) A judge may, on motion, make an order for security for costs that is just, based on one or more of the following factors:1. A party habitually resides outside Ontario.
2. A party has an order against the other party for costs that remains unpaid, in the same case or another case.
3. A party is a corporation and there is good reason to believe it does not have enough assets in Ontario to pay costs.
4. There is good reason to believe that the case is a waste of time or a nuisance and that the party does not have enough assets in Ontario to pay costs.
5. A statute entitles the party to security for costs. [15] Counsel in this case both submitted that I should follow the Family Law Rules, despite the general direction in Rule 38(1) of the Family Law Rules to use the Rules of Civil Procedure, as Rule 38(26) specifically deals with security for costs. I am not convinced. Rule 38(4) provides that subrules (5) to (45) “apply to an appeal from an order of the Ontario Court of Justice to the Superior Court of Justice” under certain statutory provisions listed. This proceeding is not an appeal from the Ontario Court of Justice, and those subrules appear to deal with different procedures than are before this Court.
[16] Although, at the end of the day, both schemes set out similar tests, and provide the Court with discretion to make an order that is just in the circumstances, in my view the appropriate rules to follow in this case are those found in the Rules of Civil Procedure.
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