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Security for Costs

. Heidari v. Naghshbandi

In Heidari v. Naghshbandi (Ont CA, 2020) the Court of Appeal sets out criteria to be considered in a security for costs motion:
[5] The respondents seek security for costs for the appeals under rr. 61.06(1)(a) or (c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 61.06(1) provides:
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.
[6] The general principles governing an order for security for costs on appeal under r. 61.06(1) are well known:
1. Rule 61.06(1) is permissive, not mandatory. A motion judge has discretion to refuse an order for security for costs, even if the respondent (moving party) otherwise meets the terms of r. 61.06(1): Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 18; Foodinvest Limited v. Royal Bank of Canada, 2020 ONCA 387, at para. 15. An order for security for costs under r. 61.06(1) should not be made routinely: Health Genetic Center Corp. v. New Scientist Magazine, 2019 ONCA 968, at paras. 22, 26.

2. 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: Yaiguaje, at para. 22; Foodinvest, at para. 15.

3. 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: Yaiguaje, at para. 24; Foodinvest, at para. 15.

4. 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: Foodinvest, at para. 17; Health Genetic, at para. 26; and Schmidt v. Toronto-Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.), at p. 6. 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: Yaiguaje, at para. 23; Foodinvest, at para. 15.
[7] With these general principles in mind, I turn to consider the respondents’ motion under rr. 61.06(1)(a) and (c) in turn.

(1) Is there good reason to believe that the appeals are frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeals: r. 61.06(1)(a)?

(a) The governing principles under r. 61.06(1)(a)

[8] Under r. 61.06(1)(a), the respondent must prove that there is good reason to believe: (1) the appeal is frivolous and vexatious; and (2) the appellant has insufficient assets in Ontario to pay the costs of the appeal: York University v. Markicevic, 2017 ONCA 651, at para. 23; Pickard v. London Police Services Board, 2010 ONCA 643, 268 O.A.C. 153, at para. 18; and Schmidt, at p. 5.

[9] The “good reason to believe” standard requires the motion judge to reach only a tentative and not a definitive conclusion on the absence of merit or assets: York University, at para. 24; Pickard, at para. 18; and Schmidt, at p. 5.

[10] The “frivolous and vexatious” element of r. 61.06(1)(a) requires the respondent to show that there is good reason to believe the appeal is: (1) “frivolous”, that is, devoid of merit or with little prospect of success: Pickard, at para. 19; Schmidt, at p. 5; and (2) “vexatious”, that is, taken to annoy or embarrass the respondent or conducted in a vexatious manner, including an oblique motive for launching the appeal: Pickard, at para. 19; York University, at paras. 32, 36; and Chinese Publications for Canadian Libraries Ltd. v. Markham (City), 2017 ONCA 968, at para. 9.

....

(2) Is there “other good reason” for ordering security for costs of the appeals: r. 61.06(1)(c)?

(a) The governing principles under r. 61.06(1)(c)

[23] A motion judge may also order security for costs of an appeal under r. 61.06(1)(c) for “other good reason”. 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): Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, 268 O.A.C. 172, at para. 8; Health Genetic, at para. 26.

[24] Examples of circumstances recognized as providing “other good reason” to justify security for costs under r. 61.06(1)(c) include:
• a finding that the appellant committed fraud, particularly if coupled with a finding that the appellant has taken steps to put his assets out of reach of his creditors: York University, at para. 58; Health Genetic, at para. 26;

• when 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: Henderson, at para. 27; Perron v. Perron, 2011 ONCA 776, 345 D.L.R. (4th) 513, at paras. 22-23; and Groia, at para. 35.
. Chinese Publications for Canadian Libraries Ltd. v City of Markham and Markham Public Library

In Chinese Publications for Canadian Libraries Ltd. v City of Markham and Markham Public Library (Ont CA, 2017) the Court of Appeal elaborates on the security for costs requirement that an appeal be 'frivolous and vexatious' under R61.01(1)(a):
[9] To find that an appeal is "frivolous and vexatious" there must be something that supports the conclusion that the appeal is "vexatious" in the sense that it is taken to annoy or embarrass the respondent or has been conducted in a vexatious manner: York University v. Markicevic, 2017 ONCA 651 (CanLII), 2017 ONCA 651 (in chambers), at paras. 19, 32 and 36; Pickard v. London Police Services Board, 2010 ONCA 643 (CanLII), 2010 ONCA 643 (in chambers), at para. 19; and Henderson v. Wright, 2016 ONCA 89 (CanLII), 2016 ONCA 89 (in chambers), at para. 20. Having heard Mr. Cao’s arguments, and considered his notice of appeal and factum, I am satisfied that he has been pursuing the appeal with diligence and in the sincere belief that there was no justification for the termination of the contract. While he may be adopting other methods that are harassing to the City to achieve his overall objective, this conduct alone does not make his appeal vexatious. The City does not meet the test for security for costs under r. 61.06(1)(a).
. Health Genetic Center Corp. (Health Genetic Center) v. New Scientist Magazine

In Health Genetic Center Corp. (Health Genetic Center) v. New Scientist Magazine (Ont CA, 2019) the Court of Appeal considered security for costs on the appeal:
II. CLAIM FOR SECURITY OF COSTS UNDER R. 61.06(1)(a)

Governing principles

[8] An order for security of costs on appeal under r. 61.06(1) is not a routine order: Schmidt v. Toronto Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.), at p. 5. The principles governing a motion for security for costs on appeal are summarized in Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at paras. 18, 19, 22, 24 and 25:
Rule 61.06 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: Pickard v. London Police Services Board, 2010 ONCA 643, 268 O.A.C. 153, at para. 17.

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”: Pickard, at para. 17 and Ravenda Homes Ltd. v. 1372708 Ontario Inc., 2017 ONCA 556, at para. 4.



In deciding motions for security for costs judges are obliged to first consider the specific provisions of the Rules governing those motions and then effectively to take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront. While the motion judge concluded that an order for security for costs would be just, with respect, she failed to undertake the second part of that analysis. The failure to consider all the circumstances of the case and conduct a holistic analysis of the critical overarching principle on the motion before her constitutes an error in principle. It therefore falls to this panel to conduct the necessary analysis of the justness of the order sought.



Courts in Ontario have attempted to articulate the factors to be considered in determining the justness of security for costs orders. They have identified such factors as the merits of the claim, delay in bringing the motion, the impact of actionable conduct by the defendants on the available assets of the plaintiffs, access to justice concerns, and the public importance of the litigation. See: Hallum v. Canadian Memorial Chiropractic College (1989), 1989 CanLII 4354 (ON SC), 70 O.R. (2d) 119 (H.C.); Morton v. Canada (Attorney General) (2005), 2005 CanLII 6052 (ON SC), 75 O.R. (3d) 63 (S.C.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 2009 CanLII 46451 (ON SC), 99 O.R. (3d) 55 (S.C.); Wang v. Li, 2011 ONSC 4477 (CanLII) (S.C.); and Brown v. Hudson’s Bay Co.,2014 ONSC 1065, 318 O.A.C. 12 (Div. Ct.).

While this case law is of some assistance, each case must be considered on its own facts. It is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness of a security for costs order. There is no utility in imposing rigid criteria on top of the criteria already provided for in the Rules. 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.
. Health Genetic Center Corp. v. New Scientist Magazine

In Health Genetic Center Corp. v. New Scientist Magazine (Ont CA, 2019) the Court of Appeal considered a security of costs issue at the court below:
[13] On this review motion, the moving parties assert that the motion judge erred by not considering whether the appellants would have sufficient assets to pay trial costs as well as appeal costs, if unsuccessful in the appeal. They point to the wording of r. 61.06(1), which permits the court to award security for costs of the appeal and of the proceedings, as well as the decision in Aegis Biomedical Technologies Ltd. v. Jackowski (1996), 1996 CanLII 952 (ON CA), 28 O.R. (3d) 558 (C.A.), in which this court awarded security for costs that included the costs awarded in the court below.

[14] The moving parties also point to r. 61.06(1)(b), which provides for the appeal court to order security for costs where it appears that an order for security for costs could be made against the appellant under r. 56.01. Rule 56.01 lists six circumstances in which an order for security for costs may be made in an action or application, including that “(d) the plaintiff or applicant is a corporation… 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”. The moving parties observe that this provision requires the court, in considering a motion for security for costs of an appeal under r. 61.06(1)(b), to consider whether the corporate appellant has insufficient assets in Ontario to pay “the costs of the defendant”. The moving parties say that “the costs of the defendant” can only be a reference to the costs they were awarded at trial, and that therefore the court in determining security for costs of an appeal must consider the corporate appellant’s ability to pay the costs ordered in the court below.

[15] I disagree. While the reference in r. 61.06(1)(b) to r. 56.01 authorizes the appeal court to consider the same factors that would be considered to warrant security for costs of an action or application, in doing so, the factors set out in r. 56.01 must be read and applied in the context of the pending appeal. To give effect to r. 56.01 in the context of an appeal, the reference to the “plaintiff” or “applicant” can only mean the “appellant”. So, for example, under r. 56.01(1)(a), the question is whether at the time of the appeal, the appellant is ordinarily resident outside Ontario. Similarly, the reference in r. 56.01(1)(d) to “the costs of the defendant or respondent” must be read as “the costs of the respondent in the appeal”. What this means is that, in the case of a corporate appellant that was a plaintiff or applicant at first instance, a judge of this court may consider ordering security for costs where there is good reason to believe that the corporate appellant has insufficient assets in Ontario to pay the costs of the appeal, even where the appeal is not frivolous and vexatious.

[16] I say this despite the fact that the court, under r. 61.06(1), is entitled to award security for costs of an appeal and of the proceeding below. Indeed, under r. 61.06(1)(a), the test in respect of sufficiency of assets is tied only to the appellant’s ability to pay costs of the appeal. The decision in Aegis Biomedical did not involve an assessment of the sufficiency of the corporate appellant’s ability to pay costs in the court below. Indeed, in that case the sole appellant was a corporation that admitted it had no assets, and had been incorporated for the purpose of pursuing the litigation: at p. 560.

[17] This interpretation of the relationship between rr. 61.06(1)(b) and 56.01(1)(d) mirrors the logic of r. 61.06(1)(a), where a motion judge only considers the appellant’s ability to pay costs of the appeal, and yet may order the costs of both the appeal and the proceeding below.

[18] Even if the moving parties’ interpretation of r. 61.06(1)(b) and r. 56.01(1)(d) were accepted, or if there were some other reason to consider the sufficiency of the corporate appellant’s assets to satisfy the costs order in the court below, the overriding consideration is whether an order for security for costs would be just, a question that needs to be considered holistically, taking into consideration the circumstances of the particular case: Yaiguaje, at para. 25. See also Foodinvest Inc. v. Royal Bank of Canada, 2019 ONCA 728, at para. 8.

[19] In this regard, the appeal is not frivolous and vexatious. The appellants appeal the judgment in the court below, and seek leave to appeal the costs order. As the motion judge observed in refusing security for costs under r. 61.06(1)(c), the corporate appellant is a going concern in Ontario, and has been for many years. The individual appellant has disclosed the location and value of his residential realty in Ontario, and he has provided copies of notices of assessment for his personal tax returns. The appellants have paid all costs in the proceedings, save for the costs order in relation to the judgment under appeal. They have already posted $300,000 security for costs in the court below. An order for security for costs based on the insufficiency of the corporate appellant’s assets in relation to the costs already ordered, and that would include security for costs of the appeal and such costs, runs the risk of undermining the appellants’ right to appeal. In my view, in all of these circumstances, the order would not be just.

[20] Next, the moving parties assert that the motion judge shifted the burden of proof by rejecting their submissions about the obvious and glaring deficiencies in the evidence respecting the sufficiency and quality of the appellants’ assets because they failed to cross-examine on that evidence. They say that the motion judge, at para. 26, refused to consider the deficiencies in the appellants’ evidence about their assets, which were already apparent on the face of the evidence, simply because the respondents did not cross-examine. I do not read the motion judge’s reasons that way.

[21] The motion judge considered the record and concluded that the information that was provided demonstrated that the appellants had sufficient assets in Ontario to pay the costs of the appeal. He did not accept the moving parties’ submissions that the appellants obviously had insufficient assets or that their evidence was deficient. Many of the same arguments were made to this panel. The motion judge conducted his own assessment of the evidence, which is entitled to deference. He was entitled, as he did, to consider the failure to cross-examine in rejecting the moving parties’ assertion that the absence of certain additional information made the financial information that was provided incomplete or unreliable. Moreover, the financial information provided in this case was detailed, and contrary to the moving parties’ submissions, did not reveal “obvious and glaring deficiencies”. The motion judge reasonably concluded that the moving parties had not met their burden of showing that the appellants had insufficient assets in the jurisdiction to pay the appeal costs.

[22] Third, in my view there was no error in the motion judge’s characterization of an order for security for costs as not “routine”: para. 8. While the court characterized orders for security for costs under r. 61.06(1)(a) as not “routine” in Schmidt v. Toronto Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1 (C.A.) at p. 5, I do not agree with the moving parties that an order for security for costs of an appeal would be “routine” under the other parts of r. 61.06(1). There is no entitlement as of right to an order for security for costs, and even where the requirements of the rule have been met, security may be refused in the motion judge’s discretion: Yaiguaje, at paras. 18 and 23.

[23] Finally, on the question of sufficiency of assets, I do not accept that the motion judge relied on irrelevant facts or ignored relevant facts. The moving parties say that the motion judge accepted dated financial information (unaudited financial statements for the years 2015 to 2018), rather than considering whether, at the time of the motion, the appellants had sufficient assets to pay costs. The moving parties assert that there was no evidence that the appellants’ financial circumstances remained the same. This argument simply invites this court to conduct a de novo assessment of the evidence, and to arrive at a different conclusion. The motion judge noted that the financial statements that were provided were all of the available financial statements (as the appellants explained, financial statements for the period ending January 30, 2019 had not yet been prepared). Again, in the absence of cross-examination, the motion judge was entitled to accept the reasonable inference that these documents provided a fair representation of the corporate appellant’s financial circumstances at the time of the motion.
. Gauthier v. Gauthier

In Gauthier v. Gauthier (Ont CA, 2019) the Court of Appeal made these useful comments on security for costs:
[8] Orders for security for costs are a blunt instrument. They are not intended to act as a roadblock to genuine claims: Izyuk v. Bilousov, 2015 ONSC 3684 (CanLII), 62 R.F.L. (7th) 131, at para. 37. They should be used sparingly and carefully because they may well have the effect of barring a party from access to the court process for a proper review of existing orders – something, for example, to which a party is entitled respecting child support orders if there has been a change in circumstances: Family Law Act, R.S.O. 1990, c. F.3, s. 37(2.1). Without commenting on whether the security for costs order was appropriate when it was made, there is now enough evidence to make a prima facie case of change in circumstances warranting a review of the child support order. The outstanding order for security for costs ought not to block that review.
. Foodinvest Limited v. Royal Bank of Canada

In Foodinvest Limited v. Royal Bank of Canada (Ont CA, 2020) the Court of Appeal considered principles applicable to security for costs orders:
(1) Relevant legal principles

[11] In Yaiguaje, this court directed that “[i]n deciding motions for security for costs judges are obliged to first consider the specific provisions of the Rules governing those motions and then effectively to take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront”: at para. 22.

[12] An order for security for costs can be made under r. 61.06(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, where it appears that 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. In its second motion for security for costs, RBC did not rely on this rule. Rather, RBC relied on the combination of r. 61.06(1)(b) (where it appears that an order for security for costs could be made against the appellant under r. 56.01) and r. 56.01(1)(d) (where it appears that there is good reason to believe that a corporate plaintiff has insufficient assets in Ontario to pay the costs of the defendant). It asserted that Foodinvest lacked sufficient assets in Ontario to pay the costs awarded at first instance and the costs of the appeal.

[13] This court discussed the interplay of rr. 61.06(1)(b) and 56.01(1)(d) in Health Genetic Center Corp. v. New Scientist Magazine, 2019 ONCA 968. In the context of a motion for security for costs of an appeal, the question under r. 56.01(1)(d) is whether there is good reason to believe that the corporate appellant (who was a plaintiff or applicant at first instance) has insufficient assets in Ontario to pay the costs of the appeal. Even where that threshold is met, the overriding consideration is whether an order for security for costs would be just, which must be considered holistically, taking into consideration the circumstances of the particular case: Health Genetic, at paras. 15-18; Yaiguaje, at para. 25. In Health Genetic, there was evidence that the corporate appellant had sufficient assets to pay costs of the appeal, but not to pay costs in the court below. The panel upheld the order of the motion judge refusing security for costs.

....

[15] While RBC is able to bring itself within the scope of rr. 61.06(1)(b) and 56.01(1)(d), this is not sufficient to warrant an order for security for costs. Rule 61.06 is permissive, not mandatory. In every case where security for costs is sought, the court must “take a step back” and consider whether an order for security for costs would be just in all the circumstances of the case. The overarching principle to be applied is the “justness of the order sought”: Ravenda Homes Ltd. v. 1372708 Ontario Inc., 2017 ONCA 556, at para. 4. Some relevant factors are the merits of the claim (in this case the appeal), any delay in bringing the motion for security for costs, the impact of actionable conduct by the defendants (or respondents) on the available assets of the plaintiffs (or appellants), access to justice concerns, and the public importance of the litigation: Yaiguaje, at para. 24. I would add that the court should give careful consideration to the amount and form of security sought by the moving party. And, “[c]ourts must be vigilant to ensure that 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, even in circumstances where the other provisions of rr. 56 or 61 have been met”: Yaiguaje, at para. 23. 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”: Yaiguaje, at para. 25.


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