Court of Appeal for Ontario

Citation: Indcondo Building Corporation v. Sloan, 2012 ONCA 83

Date: 20120207

Docket: M40879 (C54391)

Armstrong J.A. (In Chambers)

Between

Indcondo Building Corporation

Plaintiff/Appellant

and

Valerie Frances Sloan, David Robin Sloan and Cave Hill Properties Ltd.

Defendants/Respondents

Counsel:

Philip P. Healey, for the appellant

P. James Zibarras and Trung Nguyen, for the respondents

Heard: February 2, 2012

[1] The respondents seek an order requiring the law firm for the appellant to pay into court $300,000 as security for costs of the action, which was dismissed as an abuse of process, and also to pay into court $75,000 as security for costs of the appeal.

[2] It is accepted that the appellant corporation and its principal, Mr. DiPaola, are impecunious and were so found by O’Connor A.C.J.O. in a previous motion for security for costs on June 22, 2010. It is also clear that the appellant has insufficient assets in Ontario to pay the costs below and the costs of the appeal.

[3] The respondents take the position that the appeal is frivolous and vexatious and that they would ordinarily be entitled to an order for security for costs payable by the appellant pursuant to rule 61.06(1) of the Rules of Civil Procedure.

[4] In the circumstances here, it is not necessary for me to find that the appeal is or is not frivolous and vexatious to dispose of the motion. The respondents do not seek an order against the appellant but against the appellant’s law firm, which was retained on a contingency basis.

[5] The respondents argue that lawyers who act on a contingency basis and who have accepted the risk of bearing the plaintiff’s costs of litigation should be treated no differently than the plaintiff would be treated when it comes to the costs obligations to a successful defendant.

[6] With respect, I disagree. The issue does not appear to have been previously addressed by this court. Counsel were unable to cite any authority from this court on point. However, the issue was addressed squarely by Nordheimer J. of the Superior Court of Justice in Intellibox Concepts Inc. v. Intermec Technologies Canada Ltd. (2005), 14 C.P.C. (6th) 339 at para. 12:

As I have noted, the logical extension of ordering security for costs to be posted by an impecunious corporate plaintiff by reason of the fact that its solicitors are operating on a contingency fee basis is, in effect, to require those solicitors to provide the security. Solicitors who make legal services available based on contingency fee arrangements with clients, who could not otherwise afford to litigate a claim, assume the risk that they may not be paid for their work unless a favourable result is achieved. To require those solicitors to assume the additional burden of posting security for costs, with the concomitant risk of losing those funds (in addition to going unpaid for their own services), would impose a significant disincentive to contingency fee arrangements and would run contrary to the very rationale by which they are permitted. In my view, it would be incongruous to interpret the Rules of Civil Procedure in such a fashion.

[7] I agree with Nordheimer J. In my view, as a matter of principle, the lawyer who acts on a contingency fee basis is already carrying the significant risk of not being paid and, as in this case, being stuck with the costs of paying the disbursements. To add the additional burden of posting security for costs would no doubt have a chilling effect on those lawyers who might otherwise make their services available on a contingency basis – thus creating another problem for access to justice.

[8] While I have said what I believe the governing principle is, it may be that in some future case, a basis will be established upon which such an order is justified. That said, I do not see this as such a case.

[9] In the result, the motion is dismissed without costs.

“Robert P. Armstrong J.A.”