What is an Order for Security for Costs?
Granting a motion for security for costs is a discretionary remedy of the court under the Rules of Civil Procedure (the “Rules“) in favour of the defendant. The defendant will bring a motion requesting an order that the plaintiff must post security for the defendant’s litigation costs before the action may proceed any further. This puts the plaintiff in the position of carefully scrutinizing their chance of success at trial. If they decide that their action has merit, they must satisfy the court that they have the funds to pay the defendant’s costs, should the defendant ultimately succeed. This order has the effect of reducing the amount of baseless or vexatious litigation in the Ontario court system.
When is a Defendant Entitled to an Order for Security for Costs?
A defendant is not entitled to an order for security for costs in all actions. There are specific enumerated grounds in s. 56.01 of the Rules regarding the circumstances in which a defendant will be permitted to bring a motion for security for costs. The onus is on the defendant to satisfy the court that the case at hand fits within the grounds. The grounds include:
- When the plaintiff is not resident in Ontario;
- When the defendant has an existing unpaid order for costs against the plaintiff;
- When the plaintiff has another matter seeking the same relief already pending;
- When there is good reason to believe the plaintiff has insufficient funds to pay a potential costs order;
- There is reason to believe the action is vexatious or frivolous and that the plaintiff has insufficient assets to pay costs; or
- The defendant is statutorily entitled to an order for security for costs.
Rule 61.06(1) also enumerates specific circumstances that may apply to an appeal in which an order for security for costs may be granted:
- There is good reason to believe the appeal is frivolous or vexatious and that the appellant does not have the funds to pay the respondent’s costs should the respondent succeed;
- An order could be made under one of the grounds set out in Rule 56.01; or
- For any other good reason.
The Ontario Court of Appeal (ONCA) in Yaiguaje v. Chevron Corp. (2017) made it clear that an order for security of costs should only be made where the justness of the case demands it. When then will such an order be made?
The ONCA in Yaiguaje provided the general guideline that courts should use when considering making such an order. The court must remain vigilant to ensure that the remedy, which was meant as a protective provision or shield, is not used as a weapon or sword to prevent a matter from being heard and decided on its merits, even where the other provisions or tests in the Rules have been satisfied.
Factors Stemming From Case Law
Ontario’s courts have attempted to articulate the factors that should be considered when making the order. To date the following factors have been considered in Ontario common law:
- The merits of the claim;
- Any 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.
Each Case is Decided on its Merits & Unique Circumstances
The court must then take the common law guidelines as well as the Rules and apply them to the unique facts and circumstances of the case before them. There is no list of static or definitive factors. The proper approach is for the court to consider the issue holistically and ask, “Is this a just order?”.
Initially, the onus is on the moving party to show that the target party falls within one of the enumerated categories under the Rules. If the moving party meets the initial onus, the target party can rebut the onus and avoid security for costs by showing that:
- They have sufficient assets in Ontario or a reciprocating jurisdiction to satisfy a potential costs order;
- The plaintiff should be permitted to proceed to trial despite its precarious financial position should it fail because the plaintiff has a high probability of success and/or the claim is not without merit, or
- The order is unjust or unnecessary.
Seek Advice From Experienced Litigation Counsel
Issues relating to litigation can become extremely complicated. Orders for security for costs are dependent on a number of factors and the chance of success of obtaining such an order can vary drastically from case to case. It is always best to ensure that you have representation who can provide you or your business with experienced and knowledgable guidance through all aspects of the litigation process.
Contact Milosevic Fiske LLP in Toronto for unparalleled representation in even the most complex corporate and commercial disputes. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online for a consultation.