In Chahal v. Abdullah et al, 2022 ONSC 1727 , the defendant, Peter Cunnington, brought a motion for an order staying or dismissing the plaintiff’s action against him pursuant to r.56.02 of the Rules of Civil Procedure, or alternatively an order pursuant to r.56.01 requiring the plaintiff to post security for defence costs incurred up until trial, without prejudice to seek additional security for costs at a later date.
The plaintiff is 35 years old. He grew up in Ontario, attended law school in Michigan, and was subsequently called to the bar in Michigan. He currently practices law and resides in Troy, Michigan.
The plaintiff was involved in a multi-vehicle accident which occurred on Highway 403 outside of Mississauga, Ontario, on May 26, 2015. The plaintiff alleges that he suffered injuries as a result of the May 2015 accident, and issued an action in Windsor, Ontario.
Plaintiff’s counsel was asked pursuant to r.56.02 to declare, in writing, whether the plaintiff was ordinarily resident in Ontario. Counsel for the plaintiff sent an email indicating that the plaintiff resided in Michigan. Counsel was asked whether that meant that he was “ordinarily” resident in Michigan, but plaintiff’s counsel did not reply.
The defendant relied on r.56.01(1) and r.56.02.
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.
Rule 56.01 requires the court to employ a two-step process to determine whether it would be appropriate to make an order for security for costs.
The first step is for the moving party to establish that “it appears” that the individual’s circumstances fall within one of the categories set out in r.56.01(a)-(f). With the courts noting that the moving party must only show that “it appears”, it is well-noted that this is not a high threshold to meet.
Once the moving party has established that the first step is met, the onus shifts to the plaintiff to establish that the order for security for costs would be unnecessary or unjust. The plaintiff can meet their onus by demonstrating that any of the following circumstances apply:
- the plaintiff has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy an order of costs made in the litigation;
- the plaintiff is impecunious and that justice demands that the plaintiff be permitted to continue with the action because the claim is not “plainly devoid of merit”; or
- 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 .
A determination of sufficiency of assets must be based on the evidence provided. If the defendant is relying on the plaintiff having insufficient assets in Ontario to pay costs; the defendant must just show that there is a basis for concern about the sufficiency of assets.
Rule 56.02 requires that on receipt of a demand in writing from any person who has been served with the originating process, the plaintiff must declare in writing whether they are ordinarily resident in Ontario. If there is a failure to respond to the demand in writing, the court may order that the action be stayed or dismissed.
Determining whether an order for security of costs should be made
In determining whether to make an order for security of costs the courts will approach the issue in a holistic way, considering all of the relevant circumstances, including:
- 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.
Justice Carroccia’s Analysis
Justice Carroccia determined that the plaintiff fulfilled his obligation pursuant to r.56.02 when his lawyer advised that he resides in Michigan.
The defendant relied on rr. 56.01(1)(a) and 56.01(1)(e) specifically. Justice Carroccia reiterated that the defendant’s onus was low. It was clear that the plaintiff was not ordinarily resident in Ontario, which satisfied r.56.06(1)(a). In regards to r. 56.01(1)(e), Justice Corroccia noted that causation was a live issue in the case, but he was unable to say that the claim was clearly frivolous or vexatious.
Having found that the defendant met his onus in relation to r. 56.01(1)(a), the onus shifted to the plaintiff to establish that the order for security for costs was unnecessary or unjust. The plaintiff was clearly not impecunious, since he was gainfully employed. The defendant argued that the plaintiff does not have assets in Ontario to satisfy any order of costs.
The plaintiff provided no evidence that he has assets in Ontario or a reciprocating jurisdiction to satisfy any potential order for costs and he did not swear an affidavit in support of his position on the motion. Justice Carroccia also noted that he had already concluded that the claim was not clearly frivolous or vexatious.
Having found that the defendant met his onus and the plaintiff had not discharged his onus, the court’s next step was to determine if it would be just to make an order for security for costs. The plaintiff argued that the delay in bringing the motion would render the order for security for costs unjust.
A motion for security for costs should be brought promptly. In this case, the defendant relied on the plaintiff’s failure to answer undertakings following discovery as well as the pandemic as reasons for the delay. Counsel for the defendant made plaintiff’s counsel aware that this motion would be brought and served the Motion Record on March 16, 2021. The matter was originally returnable on April 27, 2021 but was adjourned at the request of the plaintiff. Justice Carroccia concluded that the explanation for the delay in bringing the motion was sufficient, and no prejudice was established.
Justice Carroccia made an order for security for costs pursuant to r. 56.01(1)(a) to cover the defendant’s costs and disbursements to date in the amount of $15,000, and the costs anticipated up until trial, without prejudice to seek further anticipated trial costs pursuant to r. 56.07.
Pursuant to r.56.01(1) there is initially a two-step process to determine whether the court may make an order for security for costs:
- The moving party establishes it appears that the individual’s circumstances fall within one of the categories set out in r.56.01(a)-(f);
- Then the onus shifts to the plaintiff to establish that the order for security for costs would be unnecessary or unjust.
Once the two-step process is satisfied, the court must still determine that an order for security for costs would be appropriate. Chahal v. Abdullah et al, 2022 ONSC 1727 (CanLII), <https://canlii.ca/t/jn8dm>  Air Palace v. Abdel, 2021 ONSC 7882 (CanLII), <https://canlii.ca/t/jl1gb>  Chill Media Inc. v. Brewers Retail Inc., 2021 ONSC 1296 (CanLII), <https://canlii.ca/t/jdd8m>  Yaiguaje v. Chevron Corporation, 2017 ONCA 827 (CanLII), <https://canlii.ca/t/hmskd>