Where a Plaintiff is Ordinarily Resident Outside of Ontario, Under What Circumstances will a Court Order Security for Costs?

August 7, 2018 | Teneil MacNeil

General Legal Principles

Rule 56.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the Court, on motion by a defendant in a proceeding, may make an order for security for costs where it appears that the plaintiff is ordinarily resident outside Ontario.

Once a defendant has shown that it “appears” that the plaintiff is ordinarily resident outside of Ontario, the onus shifts to the plaintiff to show that an order for security for costs would be unjust.

The Plaintiff may resist a motion for security for costs by demonstrating that:

(a) the plaintiff has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation;

(b) the plaintiff is impecunious and that justice demands that the plaintiff be permitted to continue with the action, i.e. an impecunious plaintiff will generally avoid paying security for costs if the plaintiff can establish that the claim is not “plainly devoid of merit”, or

(c) if the plaintiff cannot establish that it is impecunious, but the plaintiff does not have sufficient assets to meet a costs order, the plaintiff must meet a high threshold to satisfy the court of its chances of success.

Appropriate or Sufficient Assets in Ontario or Reciprocal Jurisdiction

In demonstrating that they have appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy a costs order, the plaintiff must provide full particulars of those assets, and the court must examine the quality and sufficiency of same, their exigibility, and whether they are secured.

Impecunious

The evidentiary threshold for impecuniosity is high. The threshold can only be reached by tendering complete and accurate disclosure of the plaintiff’s income, assets, expenses, liability, borrowing ability, and details of any assets disposed of or encumbered since the cause of action arose, with full supporting documentation for each category where available, including tax returns, complete banking records, records attesting to income and expenses, etc., or an explanation where not available. As stated in Hallum v. Canadian Memorial Chiropractic College, 1989 CanLII 4354 (ON SC):

A litigant…who relies on his impecuniosity to avoid an order requiring that he post security, must do more than adduce some evidence of impecuniosity.  The onus rests on him to satisfy the court that he is impecunious. … The onus rests on the party relying on impecuniosity, not by virtue of the language of rule 56.01, but because his financial capabilities are within his knowledge and are not known to his opponent; and because he asserts his impecuniosity as a shield against an order as to security for costs.

Not Impecunious

The case law establishes that where a plaintiff is not impecunious, the Court is entitled to assume that an order for security can be complied with. Still, consideration should be had as to whether the plaintiff’s claim has a good chance of success. As stated in Zeitoun v. Economical Insurance Group, 2008 CanLII 20996 (ON SCDC):

Where impecuniosity has not been shown however, a closer scrutiny of the merits of the case is warranted; in those cases there is no compelling argument that there is a danger that poverty of the plaintiff will cause an injustice by impeding pursuit of a claim that otherwise would have been permitted to be tried. Where impecuniosity has not been shown, a legitimate factor in deciding whether or not it would be just to require security for costs is whether the claim has a good chance of success.” [Emphasis added]

With respect to determining whether a claim has a “good chance of success”, Master Short, in Dynacorp Canada Inc. v. Levine, Sherkin, Boussidan, 2017 ONSC 1462, significantly stated as follows: “I interpret “good’ odds as being at the very least better than the 50-50.

In addition, Justice McSweeney, in the case of Boudreau v. TMS Lighting Ltd., 2017 ONSC 6188, made the following significant remarks:

Where a plaintiff has not established impecuniosity, he or she must meet a high threshold to show that the case has a “probability of success” such that there is a correspondingly low probability that the plaintiff will have to pay costs at the end of the day: Morton v. Canada (AG), [2005] O.J. No. 948 (ONSC) at para. 21. The threshold is not met here. While the plaintiff’s claim is not frivolous or vexatious, liability is strongly contested. … In the circumstances of this case, the plaintiff’s materials do not establish a “probability of success”.

Discretion to Refuse Order to be Exercised in Special Circumstances Only

The Court’s discretion to refuse an order for security for costs should only be exercised in special circumstances and with caution and restraint.  As stated in Eddie ‘N’ Me Production Co. N.V. v.Toronto Star Newspaper Limited et al., 1981 CanLII 1863 (ONSC) (CanLII).

The usual rule for security for costs is that a non-resident plaintiff is to post security for the costs of the action of a resident Ontario defendant, that to grant such a plaintiff relief from such obligation is the exception and not the rule, and that any relief must be granted with great care and caution and only in cases where it is clearly justified. 

Discretion as to Amount and Form of Security, and Time for Payment

Rule 56.04 of the Rules of Civil Procedure, supra, provides that the amount and form of security, and the time for making payment of same or otherwise giving the required security, shall be determined by the Court.

As stated by Justice Quinn in Morton v. Canada (Attorney General), 2005 CanLII 6052 (ON SC):

Despite the generous discretion available, where the need for security for costs is made out, the court, absent exceptional circumstances, should order security in the amount of the actual anticipated costs and not become weak-kneed at that prospect. This is not to say, however, that the full anticipated costs of the entire action must be ordered.

Unless other factors apply, security for costs must be determined on the basis of the estimated party-and-party costs which a defendant might reasonably expect to assess.

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