Khan et al. v. Metroland Printing, Publishing & Distributing Ltd. et al.

[Indexed as: Khan v. Metroland Printing, Publishing & Distributing Ltd.]

68 O.R. (3d) 135

[2003] O.J. No. 4261

Court File No. 98-CV-140288

Divisional Court File No. 461/01

Ontario Superior Court of Justice

Divisional Court

Lane, Meehan and Linhares de Sousa JJ.

October 27, 2003

Civil procedure -- Security for costs -- Defamation action -- In defamation action availability of security for costs is determined under s. 12 of Libel and Slander Act and not rule 56.09 of Rules of Civil Procedure -- Libel and Slander Act, R.S.O. 1990, c. L.12, s. 12 -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.02(1)3, 1.05, 56.09.

Torts -- Libel and slander -- Procedure -- Security for costs -- In defamation action availability of security for costs is determined under s. 12 of Libel and Slander Act and not rule 56.09 of Rules of Civil Procedure -- Libel and Slander Act, R.S.O. 1990, c. L.12, s. 12 -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.02(1)3, 1.05, 56.09.

On October 28, 1997, the defendant Metroland Printing, Publishing & Distributing Ltd. published an article in the Richmond Hill Liberal that concerned the candidacy of CK for mayor of the Town of Richmond Hill. CK and four members of her family commenced an action for damages for defamation. At the commencement of the action, the plaintiffs were represented by a common solicitor of record but, subsequently, they would from time to time act in person. In some instances, the plaintiff SK was authorized by the other plaintiffs to represent them.

In February 2000, Nordheimer J. was appointed to case manage the action pursuant to rule 37.15, and SK moved for, amongst other things, a summary judgment dismissing a counterclaim in the action. SK's motion was dismissed, and he was ordered to pay costs forthwith. The costs totalled $21,631.95. SK's motion for leave to appeal was dismissed with additional costs fixed against him for $4,500. SK did not pay the costs and, in November 2000, when a new solicitor of record attempted to arrange discoveries, counsel for the defendants refused to proceed. [page136] In 2001, the defendants brought a motion pursuant to rule 57.03 seeking a stay of proceedings against SK, who once again was acting in person, and against the other four plaintiffs who continued to be represented by a solicitor of record. The plaintiff SK did not respond to the motion. The four plaintiffs contested the relief sought by the defendants.

On the motion, Nordheimer J. held that the defendants were entitled to relief against SK but, with respect to the four plaintiffs, he denied the stay. However, Nordheimer J. concluded that rules 56.09 and 1.05 allowed the court to order security for costs where it grants relief and where it has discretion to impose terms as a condition of relief. Before this order was made, no party raised the issue of the applicability of s. 12 of the Libel and Slander Act. Leave to appeal having been granted, the four plaintiffs appealed to the Divisional Court.

Held, the appeal should be allowed.

Rule 1.02(1)3 of the Rules of Civil Procedure states that where a statute provides for a different procedure from the one set out in the Rules, the statute shall apply. There was an unequivocal difference in the procedural requirements found under the Libel and Slander Act; the requirements under the Act were more onerous than under Rule 56. Nordheimer J. erred in not considering and not applying s. 12 of the Libel and Slander Act to the question of posting security for costs even though it was not raised by any of the parties on the motion.

APPEAL pursuant to s. 19(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 to set aside an order that the plaintiffs post security for costs.

Cases referred to Armstrong v. Cambrian Equipment Sales Ltd. (1977), 1977 1188 (ON SCSM), 17 O.R. (2d) 33, 79 D.L.R. (3d) 622 (Small Cl. Ct.); Austen v. Torstar Corp., [2001] O.J. No. 3378 (QL) (S.C.J.); Christoffersen v. Cambridge (City), [1986] O.C.P. 34 (S.C.); Clarke's Electrical Service Ltd. v. Gottardo Construction Ltd. (2001), 9 C.L.R. (3d) 14, [2001] O.J. No. 1517 (QL), [2001] O.T.C. 288 (S.C.J.); Cosyns v. Canada (Attorney General) (1992), 1992 8529 (ON SCDC), 7 O.R. (3d) 641, 88 D.L.R. (4th) 507 (Div. Ct.); Daishowa Inc. v. Friends of Lubicon, [1996] O.J. No. 729 (QL) (Div. Ct.); Equity Waste Management of Canada Corp. v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, 40 M.P.L.R. (2d) 107 (C.A.), revg (1995), 22 M.P.L.R. (2d) 167 (Ont. Gen. Div.), supp. reasons (1994), 1995 7182 (ON SC), 22 O.R. (3d) 796, 27 M.P.L.R. (2d) 123 (Gen. Div.); Friends of Oldman River Society v. Canada (Minister of Transport) (1992), 1992 110 (SCC), [1992] 1 S.C.R. 3, 48 F.T.R. 160n, 84 Alta. L.R. (2d) 129, 88 D.L.R. (4th) 1, 132 N.R. 321, [1992] 2 W.W.R. 193; Goudie v. Oliver, [1957] O.W.N. 575; Grenier v. Southam Inc. (1994), 1994 432 (ON CA), 19 O.R. (3d) 799 (C.A.); Gunn v. North York Public Library Board (1977), 1976 764 (ON SC), 14 O.R. (2d) 554 (H.C.J.); Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 219 Sask. R. 1, 211 D.L.R. (4th) 577, 286 N.R. 1, 272 W.A.C. 1, [2002] 7 W.W.R. 1, 30 M.P.L.R. (3d) 1, 2002 SCC 33, 10 C.C.L.T. (3d) 157; Hunter v. Pittman (1988), 25 C.P.C. (2d) 145, [1988] O.J. No. 478 (QL) (H.C.J.); John Wink Ltd. v. Sico Ltd. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, 15 C.P.C. (2d) 187 (H.C.J.); Lana International Ltd. v. Menasco Aerospace Ltd. (2000), 2000 16845 (ON CA), 50 O.R. (3d) 97, 190 D.L.R. (4th) 340, 50 C.P.C. (4th) 244, [2000] O.J. No. 3261 (QL) (C.A.), revg (1999), 1999 14883 (ON SC), 181 D.L.R. (4th) 534 (Ont. S.C.J.); Love v. Mixing Equipment Co. (1987), 22 O.A.C. 231, 18 C.P.C. (2d) 79 (Div. Ct.) (sub nom. Sydlo Inc. v. Mixing Equipment Co. (No. 3)); McNight v. Emmerson, [2001] O.J. No. 4240 (QL), [2002] O.T.C. 846 (S.C.J.); Metrin Mechanical Contractors Ltd. v. Big H Construction Ltd. (2001), 10 C.P.C. (5th) 302, [2001] O.J. No. 1319 (QL). [2001] O.T.C. 249 (S.C.J.); R. v. Greenwood (1992), 1992 7750 (ON CA), 7 O.R. (3d) 1, 70 C.C.C. (3d) 260, 10 C.R. (4th) 392 (C.A.) [Leave to appeal to S.C.C. refused [1992] 1 S.C.R. viii]; Reiger v. Burrows (1987), 1987 4420 (ON SC), 58 O.R. (2d) 203, 14 C.P.C. (2d) 318 (Master) (sub nom. Reiger v. Chief of Police Burrows D.K.); Stein Estate v. Kathy K (The), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1, 6 N.R. 359; [page137] Stone v. Metropolitan Toronto Housing Authority (1987), 1987 4029 (ON SC), 59 O.R. (2d) 605, 19 C.P.C. (2d) 31 (Dist. Ct.); Sydlo Inc. v. Mixing Equipment Co. Inc. (1986), 8 C.P.C. (2d) 73 (Ont. H.C.J.), revg in part [1986] O.J. No. 2542 (QL), 8 C.P.C. (2d) 179 (S.C.) (sub nom. Love v. Mixing Equipment Co. Inc., General Signal Ltd. v. Sydlo Inc. (No. 1)); Van Riessen v. Canada (Attorney General) (1994), 35 C.P.C. (3d) 165, [1994] O.J. No. 2580 (QL) (Gen. Div.); Whalen v. Ottawa Sun, [2001] O.J. No. 2751 (QL) (S.C.J.) (Master) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 19(1)(b), 106 Libel and Slander Act, R.S.O. 1990, c. L.12, s. 12 Public Authorities Protection Act, R.S.O. 1990, c. P.38, s. 10 Public Authorities Protection Act, R.S.O. 1950, c. 303, s. 14 Rules and regulations referred to O. Reg. 560/84, rule 56.01 Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.02(1) 3, (3), 1.05, 37.15, 56, 56.01(1), 56.09, 57.03, 62.02(4) (a)

Philip P. Healey, for plaintiffs/appellants Colleen Khan, Ray Khan, James Khan and Sonny Khan. Alison B. Woodbury, for defendants/respondents Metroland Printing, Publishing & Distributing Ltd., Ian Proudfoot, Brenda Larson, Debora Kelly, David Teetzel and Christopher Douris. C.M. Loopstra, QC, for defendant William F. Bell.

The judgment of the court was delivered by

LINHARES DE SOUSA J.: --

Introduction

[1] This is an appeal brought pursuant to s. 19(1)(b) of the Courts of Justice Act, R.S.C. 1990, c. C.43 seeking to set aside the order of Nordheimer J., dated July 4, 2001, ordering the four appellants to this appeal, Colleen Khan, Ray Khan, James Khan and Sonny Khan, to post security for costs in the total amount of $50,600 pursuant to rule 56.09 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 ("Rules") as a condition to their continuing to prosecute their claim against the respondents.

[2] Leave to appeal from the decision of Nordheimer J. to this court was granted by Then J. on November 5, 2001.

Standard of Review

[3] The standard of review for appeals from the order of a judge was not contested by counsel and is widely accepted to be whether [page138] or not the decision of the judge was "clearly wrong". This standard applies to both findings of fact and to the application of legal principles. A reviewing court may vary or set aside the decision of a motions judge where the judge"disregarded, misapprehended, or failed to appreciate relevant evidence" and "made a finding not reasonably supported by the evidence, or drew an unreasonable inference from the evidence". (See Stein Estate v. Kathy K (The), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1; Cosyns v. Canada (Attorney General) (1992), 1992 8529 (ON SCDC), 7 O.R. (3d) 641, 88 D.L.R. (4th) 507 (Div. Ct.); and Equity Waste Management of Canada Corp. v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, 40 M.P.L.R. (2d) 107 (C.A.).)

[4] On questions of law, however, the standard of review is correctness. This has long been established by the jurisprudence. In Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, 211 D.L.R. (4th) 577, [2002] S.C.J. No. 31 (QL), the Supreme Court of Canada recently addressed the standards of review which can be summarized in the following way [at paras. 8, 10 and 28]:

On a pure question of law, the basic rule with respect to the review of a trial judge's findings is that an appellate court is free to replace the opinion of the trial judge with its own. Thus the standard of review on a question of law is that of correctness: . . .

The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a "palpable and overriding error" . . .

Where the trier of fact has considered all the evidence that the law requires him or her to consider and still comes to the wrong conclusion, then this amounts to an error of mixed law and fact and is subject to a more stringent standard of review [than for findings of fact] . . .

[5] Within the parameters of this standard, it is also accepted that where the exercise of discretion is involved, the decision of the motions judge is owed the highest level of deference and should not be overturned unless it is "so clearly wrong as to amount to an injustice". This is particularly so where the discretionary decisions in question are those of a case management judge (rule 37.15 of the Rules) as Nordheimer J. had been so appointed in this matter. (See Daishowa Inc. v. Friends of Lubicon, [1996] O.J. No. 729 (QL) (Div. Ct.).)

Factual Background

[6] The four appellants are members of an immediate family. As plaintiffs, they together with another member of their immediate family, Mr. Shelly Khan, who is not an appellant on this appeal, [page139] commenced a libel action against the respondents on January 23, 1998. The action arises in connection with an article published on October 28, 1997 in the Richmond Hill Liberal, a Metroland newspaper, during the course of the municipal election held in November 1997. The article concerned the then candidacy for mayor of the Town of Richmond Hill of the appellant, Colleen Khan. The article also referred to the appellants, James Khan, Sonny Khan and the plaintiff, Shelly Khan, who had been candidates for municipal office in previous elections. Among other things, the article also attributed certain statements to the respondent, William Bell, who was also a candidate for the office of mayor of Richmond Hill. The appellants and the plaintiff, Shelly Khan, allege the statements made by the respondent, William Bell, were defamatory of them and they seek damages as a consequence.

[7] At the commencement of the libel action, all four appellants and the plaintiff, Shelly Khan, had a common solicitor of record. The Metroland respondents and Mr. Bell had their own solicitor of record. In December 1999, the plaintiff, Shelly Khan served a Notice of Intention to Act in Person and a withdrawal of the appellants' and his common solicitor of record. He further notified the respondents by letter dated December 21, 1999 that the respondents should direct "all correspondence, communication and service" in connection with the Khan family to him. (See Appeal Book I of II, pp. 120-21.) In view of this development, the respondents sought the appointment of a judge pursuant to rule 37.15 which reads as follows:

37.15 (1) Where a proceeding involves complicated issues or where there are two or more proceedings that involve similar issues, the Chief Justice or Associate Chief Justice of the Superior Court of Justice, a regional senior judge of the Superior Court of Justice or a judge designated by any of them may direct that all motions in the proceeding or proceedings be heard by a particular judge, and rule 37.03 (place of hearing of motions) does not apply to those motions. . . .

[8] Nordheimer J. was so appointed on February 1, 2000.

[9] On February 6, 2000, the four appellants, Colleen Khan, Ray Khan, James Khan and Sonny Khan, served their own notices of intent to act in person. However, in a letter signed by all four appellants and the plaintiff, Shelly Khan, prior to the initial case conference before Nordheimer J., the four appellants indicated that the plaintiff, Shelly Khan, was authorized to represent them in certain instances. They wrote"It is our position that any issue which affects one of us affects all of us . . ." (see Appeal Book I of II, pp. 125-26).

[10] In his letter dated February 11, 2000, Nordheimer J. permitted the plaintiff, Shelly Khan, to appear at the initial case [page140] conference before him on behalf of himself and the four appellants only for the purpose of agreeing to a schedule to deal with various outstanding proceedings such as ongoing discoveries and some preliminary motions that the plaintiff, Shelly Khan, wished to bring before him. However, Nordheimer J. ruled, as he wrote in his letter of February 11, 2000 and in his reasons at p. 2, that the appellants and the plaintiff, Shelly Khan could only appear on their own behalves and that no single plaintiff in the action could purport to represent the other plaintiffs on any motions before the court or other steps in the proceedings in terms of any substantive matters that will be determined by the court. (See Appeal Book I of II, p. 127.)

[11] As a result of the initial case conference held before Nordheimer J. on February 16, 2000, a fixed schedule was set for the carrying out and completion of discoveries. A date, February 28, 2000, was also set for the hearing by Nordheimer J. of the preliminary motions to be brought by the plaintiff, Shelly Khan and by the respondent, Mr. William Bell.

[12] On February 28-29, 2000, Nordheimer J. heard and dismissed Shelly Khan's motion for summary judgment dismissing the counterclaim of the respondent, William Bell, or in the alternative, to sever the counterclaim from the main action. He also dismissed, with some exceptions, Shelly Khan's motions to strike certain paragraphs of the statement of defence of the respondents. Furthermore, the respondent, William Bell's, motions for leave to amend his statement of defence and counterclaim and for an order for substituted service were granted.

[13] Following the written submissions on costs of these motions from the respondents and the plaintiff, Shelly Khan, Nordheimer J. ordered costs against Shelly Khan, payable forthwith"which shall mean prior to the commencement of the continued examinations for discovery". The costs fixed by Nordheimer J. and the costs ordered to be assessed finally came to a total amount of $21,631.95.

[14] After his lack of success on his motions before Nordheimer J., the plaintiff, Shelly Khan, wrote letters dated April 10, 2000 and April 12, 2000 to Regional Senior Justice Blair to have Nordheimer J. removed as case management judge appointed under rule 37.15 alleging that his "confidence in the justice system as well as that of the other plaintiffs had been greatly shaken to say the least". By letters dated April 11, 2000, the respondents contested this request. By letter dated April 12, 2000, Regional Senior Justice Blair declined to reverse Nordheimer J.'s appointment as a rule 37.15 judge.

[15] The plaintiff, Shelly Khan, brought a motion for leave to appeal to Divisional Court from the orders of the motions judge [page141] including the costs awards. Shelly Khan's motion for leave to appeal was dismissed with additional costs fixed against him for $4,500 on May 17, 2000.

[16] Despite the demands made by the respondents, Shelly Khan did not pay the costs orders made against him.

[17] On September 13, 2000, a Notice of Change of Solicitors indicated that the four appellants and the plaintiff, Shelly Khan, now had one counsel of record, Mr. Philip Healey of the firm Aird & Berlis. (See Appeal Book I of II, pp. 201-02.)

[18] When Mr. Healey wrote to counsel for the respondents on November 29, 2000 asking for dates for the continued examinations for discovery in connection with the action, counsel for the respondents, by letter dated December 11, 2000, refused to proceed with the examinations for discovery of any party until the costs orders against Shelly Khan had been paid. They took the position that the order of Nordheimer J. dated April 4, 2000, indicated that the outstanding costs awards against Shelly Khan were to be paid forthwith which was meant to be prior to the commencement of the continued examination for discovery. It was also the position of respondent's counsel that, in view of the schedule previously set by the motions judge for continuation of the examination for discoveries, a schedule that had already expired, any further rescheduling of examinations for discovery could only be done with the approval of Nordheimer J. as the designated rule 37.15 judge.

[19] On January 12, 2001, the plaintiff, Shelly Khan, informed the respondents that he continued to act on his own behalf in the action and that the Notice of Change of Solicitors filed on September 13, 2000 that included him with the four appellants as having the same counsel of record, Mr. Philip Healey of the firm Aird & Berlis, was done so in error. On January 22, 2001, the plaintiff, Shelly Khan, served a Notice of Intention to Act in Person.

[20] In view of the respondents' continual refusal to proceed with the examination for discoveries, Mr. Healey, on behalf of the four appellants, Colleen Khan, Ray Khan, James Khan and Sonny Khan, wrote, on January 30, 2001, to Nordheimer J. as case management judge to schedule either a telephone conference, meeting or motion to resolve certain outstanding issues necessary to move the action forward including the fixing of discovery dates. In that same letter, Mr. Healey took the position that since the outstanding costs order was made against the plaintiff, Shelly Khan, alone, for whom he did not act, his four clients were not in default of any costs order. They had not brought any motion nor had they participated in the motions. His clients, therefore, should be entitled to proceed with their examinations for discovery. [page142]

[21] Counsel for the respondents responded to this request of Mr. Healey by informing Nordheimer J. that they intended to bring a motion pursuant to rule 57.03 seeking a stay of proceedings against all four of the appellants and the plaintiff, Shelly Khan, on the basis of the outstanding costs orders. Alternatively, the respondents would be seeking an order requiring the four appellants, Colleen Khan, Ray Khan, James Khan and Sonny Khan, to post security for costs. The respondents relied on the court's general power to stay proceedings pursuant to s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and also the general power of the court to control its process and to prevent an abuse of process for the relief that they sought against the appellants. The four appellants, in reply to the respondents' motion, did not bring a countermotion of their own but merely defended themselves by contesting the relief sought by the respondents.

[22] By the time the motion came before Nordheimer J. on June 27, 2001, Shelly Khan had still not satisfied the outstanding costs orders against him. Furthermore, Shelly Khan had been out of the country for some time; his exact whereabouts were unknown; and, there was no way of communicating with him. The plaintiff, Shelly Khan, did not respond to the motion.

Decision of Nordheimer J. Under Appeal

[23] With respect to the plaintiff, Shelly Khan, Nordheimer J. found that the respondents were entitled to the relief sought under rule 57.03(2) in view of Shelly Khan's consistent refusal to obey the orders of the court requiring him to pay costs to the respondents.

[24] Nordheimer J., out of "an abundance of caution", was not prepared to dismiss Shelly Khan's claim at that stage. He concluded that the more appropriate relief was to stay the claim of Shelly Khan to give him one last opportunity to cure his default. He was given 90 days from the date of his reasons (July 4, 2001) to do this, failing which, the claim of Shelly Khan was to be automatically dismissed with costs payable by him to the respondents forthwith after assessment.

[25] With respect to the four appellants, Nordheimer J. denied the respondents' request that their claims also be stayed. The motions judge expressed concerns for the conduct of the appellants and the plaintiff, Shelly Khan, in the action as follows [at paras. 12-13]:

I confess to being troubled by a situation where it appears that a group of plaintiffs acting on their own behalves have set up one of their number to bring motions which would clearly benefit all of the plaintiffs and then when such motions are unsuccessful, with the result that the moving plaintiff is [page143] ordered to pay costs but fails to do so, disassociate themselves from that plaintiff and seek to continue the proceeding. Such arrangements give rise to a significant opportunity to misuse the process of the court.

In an effort to disassociate themselves from the conduct of Shelly Khan, the other plaintiffs now say that they had parted company with him and his handling of this litigation from December 1999. I have serious problems in accepting that assertion. There was never any suggestion prior to these motions being launched that there was any disagreement among the plaintiffs as to the conduct of this litigation and there was ample opportunity for the court to have been made aware of such disagreement, if it existed. For example, some of the other plaintiffs attended on the motions heard by me in February 2000 but they did not make any statements to the effect that they were disassociating themselves from Shelly Khan with respect to those motions. To the contrary, they appeared to be actively assisting Shelly Khan in his submissions on those motions. Similarly, there have been subsequent events in this litigation where the other plaintiffs could have made it known that their position was independent of Shelly Khan but they have never done so.

[26] Nordheimer J. was not convinced that a stay of the appellants' case was appropriate. He states at [para. 15] of his Reasons for Decision:

It is sufficient for me to say that I am not satisfied that it would be a proper exercise of the court's discretion to order a stay of this action based on costs orders that are unpaid but for which the other plaintiffs bear no direct liability. To do otherwise would, as I have already said, be to do indirectly what I already ruled could not be done directly. I also do not believe that the conduct here would warrant the granting of a stay under the principle of abuse of process. The motion to stay the claims of the other plaintiffs is therefore dismissed.

[27] In considering the alternative relief sought by the respondents on the motion, namely the posting of security for costs, Nordheimer J. concluded that rule 56.09 and rule 1.05 allowed the court to order security for costs where it grants relief and where it has a discretion to impose terms as a condition of granting relief.

[28] Rule 56.09 reads:

56.09 Notwithstanding rules 56.01 and 56.02, any party to a proceeding may be ordered to give security for costs where, under rule 1.05 or otherwise, the court has a discretion to impose terms as a condition of granting relief and, where such an order is made, rules 56.04 to 56.08 apply with necessary modifications.

[29] Rule 1.05 states:

1.05 When making an order under these rules the court may impose such terms and give such directions as are just.

[30] In their submissions on the motion before Nordheimer J., no party appears to have raised the issue of the applicability of s. 12 of the Libel and Slander Act, R.S.O. 1990, c. L.12 ("LSA") either in conjunction with rule 56.09 or to the exclusion [page144] of rule 56.09, to the issue of security for costs. Section 12 of the LSA reads as follows:

Security for costs

12(1) In an action for a libel in a newspaper or in a broadcast, the defendant may, at any time after the delivery of the statement of claim or the expiry of the time within which it should have been delivered, apply to the court for security for costs, upon notice and an affidavit by the defendant or the defendant's agent showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements complained of were made in good faith, or that the grounds of action are trivial or frivolous, and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, and the order is a stay of proceedings until the security is given. R.S.O. 1990, c. L.12, s. 12 (1).

[31] The issue for the motions judge was whether on the motion before him, there was relief being granted to the appellants to which a term requiring the posting of security could attach as the respondents argued. He concluded that there was, stating at [paras. 19-20] of his Reasons for Decision.

With respect to the first alleged form of relief, the defendants rely on Sydlo Inc. v. Mixing Equipment Co. (No. 3) (1987), 18 C.P.C. (2d) 79 (Ont. Div. Ct.) where Galligan J. said, at pp. 81-82:

The Master then decided that, instead of setting aside the order to continue, he would grant relief to the respondent by declining to set it aside and directing that it continue in force, subject to terms. In our opinion, when the Master declined to set aside the order to continue he granted relief to the respondent, and thus, had jurisdiction under r. 1.05 and r. 56.09 to impose terms as a condition of that relief. (emphasis added)

Like the situation in Sydlo where the Master refused the defendant's motion to set aside the order to continue, the defendants say here, that if I refuse their motion to stay, that is the equivalent to the granting of relief to the plaintiffs which would then empower the court to require the posting of security for costs as a term of that relief. While I will confess that such an interpretation did not come readily to me from the language of rule 56.09, I acknowledge that the rule can be so read. I am, of course, bound by Divisional Court's decision.

In any event, I accept that the plaintiffs must seek relief regarding their right to continue the prosecution of this action, including the re-scheduling of the examinations for discovery, in light of my earlier order regarding the conduct of those examinations and, therefore, I am satisfied that relief is effectively being granted here to the other plaintiffs of a nature and kind that is sufficient to invoke rule 56.09. Alternatively, at the very least, this is a case where the plaintiffs are seeking an "indulgence" -- as that expression was used by Morden J.A. in Toronto-Dominion Bank v. Szilagyi Farms Ltd. (1988), 65 O.rule (2d) 433 (C.A.) -- which is also sufficient to invoke the jurisdiction of the court to require security for costs to be given. [page145]

[32] In the circumstances of the case before him, Nordheimer J. arrived at the conclusion that it was appropriate to require the appellants to post security for costs as a term of continuing this action. At [paras. 25-26] of his Reasons for Decision, he states:

The question then becomes whether it is appropriate to require the other plaintiffs to post security for costs as a term of continuing this action. I have concluded that it is appropriate in the particular circumstances of this case. I earlier expressed difficulty in accepting the position of the other plaintiffs that they had parted company with Shelly Khan regarding his actions in this litigation. However, even if I accept that such a split developed in their relationship, it still seems to me that the other plaintiffs cannot disassociate themselves entirely from the past events. They are not only co-plaintiffs in this litigation, and thus were clearly prepared to accept the benefit of any relief that Shelly Khan might achieve through his motions, they are also all members of the same family. Indeed, their claim for damages arising from the alleged libels is based very much on their being members of the same family -- see, for example, paragraphs 64 and 65 of the statement of claim. They therefore have a much more intimate connection to each other than might normally be the case in situations of multiple plaintiffs. In such circumstances, it does not seem unreasonable to impose some degree of shared responsibility on them for the conduct of the proceeding.

Further, there is evidence from the history of this proceeding that there may have been, and could in the future be, an abuse of the court's process. Indeed, such an abuse is arguably extant regarding the motions brought by Shelly Khan. The court must be vigilant in dealing with any abuse of its process. This is the thrust of the comments made by Southin J.A. that I quoted above from Household Trust Co. v. Golden Horse Farms Inc., supra. If the other plaintiffs are serious about prosecuting this claim (and I am prepared to assume that they are) then a requirement that they post security for costs in light of the conduct of Shelly Khan is not unfair or unreasonable. On the other hand, to not place such a requirement on the other plaintiffs would be "manifestly unfair" to the defendants given the events that have taken place to date.

[33] After the motions judge's decision on security for costs made against the appellants, by letter dated September 27, 2001, counsel for the appellants wrote to Nordheimer J. informing him of their intention to seek leave to appeal his decision and to request that he recuse himself as case management judge on the basis that he has demonstrated "a reasonable apprehension of bias".

Endorsement of Then J. Granting Leave to Appeal

[34] The issue of the applicability of s. 12 of the LSA was first raised by the appellants on their motion for leave before Then J. Because the motions judge did not consider the applicability of s. 12 of the LSA on the motion, and had based his award for security for costs on rule 56.09, Then J. was of the view that there was good reason to doubt the correctness of the decision based on rule 1.02(1)3 which states: [page146]

1.02(1) These rules apply to all civil proceedings in the Court of Appeal and in the Superior Court of Justice, subject to the following exceptions:

3. They do not apply if a statute provides for a different procedure.

and the jurisprudence found under that rule. (See Gunn v. North York Public Library Board (1977), 1976 764 (ON SC), 14 O.R. (2d) 554 (H.C.J.).)

[35] Then J. stated in his endorsement [at para. 3]:

In my view, it is important for the development of the jurisprudence of this province for the Divisional Court to determine the interplay between Rule 56.09 and s. 12 of the Libel and Slander Act or whether s. 12 of the Libel and Slander Act constitutes a complete Code in libel actions to the exclusion of Rule 56.09.

[36] Then J. was also of the view, after reading the reasons of Nordheimer J., that his conclusion relating to the issue of whether on the motion there was a granting of relief to the appellants to which the posting of security could be attached as a condition, and his reliance on the decision of the Divisional Court in Sydlo Inc. v. Mixing Equipment Co. (1987), 18 C.P.C. (2d) 79, 22 O.A.C. 231 (Div. Ct.) to come to that conclusion was open to serious debate. He, therefore, granted leave to appeal to the Divisional Court under rule 62.02(4)(a). He reserved costs to the Divisional Court panel hearing the appeal.

The Issues on Appeal

[37] The issues raised on this appeal are the following:

1. Did the learned motions and case management judge err in not considering and not applying s. 12 of the LSA to the question of the posting of security for costs in the libel action before him even though it was not raised by any of the parties to the motion?

2. If the answer to issue #1 is in the negative, did the learned motions and case management judge err in finding that he had jurisdiction to award security for costs under rule 56.09? More specifically, did the learned motions judge err in finding that security for costs could be ordered in the circumstances of this case "as a term of relief"?

3. Assuming the learned motions and case management judge had jurisdiction to order security for costs pursuant to rule 56.09, did he exercise his discretion fairly in the circumstances of this case? [page147]

Position of the appellants

[38] With respect to the first issue, the appellants take the position that before the motions judge could order the appellants to post security for costs in an action to which the LSA applies, he should have considered and applied the test established by s. 12 of the LSA. The test and procedure found in s. 12 of the LSA is a different and more onerous one with cumulative conditions than that found in Rule 56. They rely on Gunn, supra, where the defendant failed to meet all of the three cumulative grounds required by s. 20(1) of the LSA (now s. 12 of the current LSA) and therefore did not succeed in his application for security for costs.

[39] The appellants argue that rule 1.02(1)3 rendered the Rules inapplicable to those cases where a "statute provides for a different procedure" which s. 12 of the LSA does with respect to the question of security for costs in libel actions. Rules 1.02(1)3 and 56.01(1)(f) establish that the libel and slander legislation excludes and takes precedence over the Rules.

[40] With respect to the second issue, the appellants argue that rule 56.09, by its wording, grants the court the jurisdiction to award security for costs as an imposed term only "as a condition of granting relief" in a motion or matter before it. On a strict reading of that rule, it cannot apply to the facts of this case where, on the respondents' motion for security for costs, the appellants sought no relief but merely responded to defend against the motion. The appellants further argue that the fact that they would have had to seek a ruling from Nordheimer J. to proceed with the examinations for discoveries because of the expired schedule for such examinations cannot be considered the granting of relief within the meaning of rule 56.09. While such a request or indulgence might have been made on their behalf by their counsel in a correspondence to the motions judge as the case management judge, that request or issue was not specifically before the judge on the respondents' motion for security for costs.

[41] The appellants deny that the case, Sydlo Inc. v. Mixing Equipment Co., [1986] O.J. No. 2542 (QL), 8 C.P.C. (2d) 179 (S.C.) could be properly relied on by Nordheimer J. to find that he had jurisdiction to grant an order for security for costs under rule 56.09. The appellants argue that the facts of the Sydlo, supra, case are substantially distinguishable from the case at bar.

[42] With respect to the last issue, the appellants take the position that the motions judge exercised his discretion unfairly in awarding security for costs against them. They argued that the motions judge's conclusion that it did not seem "unreasonable to impose some degree of shared responsibility on them [page148] [the appellants] for the conduct of the proceedings" was unfair and unjustified. They had not, in any way, supported the unsuccessful motions of the plaintiff, Shelly Khan. There was no basis for the motions judge's finding of potential abuse of process.

Position of the respondents

[43] With respect to the first issue regarding the interplay between s. 12 of the LSA and the Rules, the respondents argue firstly, that by not arguing s. 12 of the LSA before the motions judge, raising it only for the first time as an issue in seeking leave to appeal to this court, the appellants effectively conceded on the motion that rule 56 of the Rules applied to the action. The appellants did not argue then that the LSA constituted a complete code for security for costs and, therefore, the motions judge properly addressed the argument put to him by the appellants concerning his jurisdiction to award security for costs.

[44] Secondly, the respondents take the position that there is no authority for the proposition that s. 12 of the LSA must be applied to this case to the exclusion of the applicability of the Rules. They argue that the case referred to by the appellants, Gunn, supra, does not stand for that proposition. Rather it establishes that if a party seeks to rely on the LSA for an order for security for costs, it must meet the full test laid out in the Act to succeed on the motion.

[45] It is the view of the respondents that the Rules are regulations of the Courts of Justice Act (Ontario). Therefore, the Rules like the LSA are enactments of the Legislature of Ontario. They must be read as complementary except where there is a clear repugnancy or conflict. No such conflict can be found. Therefore, access to the two regimes is clearly intended. For this, the respondents relied on the decision of Friends of Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, 88 D.L.R. (4th) 1, at p. 38 S.C.R.

[46] In support of their position of complementary enactments, the respondents point to the legislative history of s. 12 of the LSA as well as to the wording found in s. 12 of LSA. By the use of the permissive word "may", the section permits rather than mandates applicable defendants to seek security under the LSA. Section 12 also expressly refers to the co-existing access to security for costs under the Rules in dealing with plaintiffs who reside out of Ontario. The last four lines of s. 12 read:

. . . and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, . . .

(Emphasis added) [page149]

[47] Finally, the respondents argue that an examination of the Rules themselves point to the complementary nature and co-existence of the two enactments. Rule 56.01(1)(f) which reads:

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,

(f) a statute entitles the defendant or respondent to security for costs.

expressly includes security for costs under a statute as one ground on which security for costs may be ordered under the Rules.

[48] Rule [1.02(1)3], the respondents argue, will not oust the application of the Rules in a matter unless the statute is found necessarily inconsistent or in conflict with what is provided under the Rules.

[49] The respondents also point to a number of cases where media libel defendants in Ontario, like defendants in other types of actions, were regularly awarded security for costs under rule 56. See Austin v. Torstar Corp., [2001] O.J. No. 3378 (QL) (S.C.J.), at paras. 1, 2 and 24, and Grenier v. Southam Inc. (1994), 1994 432 (ON CA), 19 O.R. (3d) 799 (C.A.), at p. 800.

[50] With respect to the second issue, the respondents argue that Nordheimer J. was correct in finding that the refusal of the respondents' motion to stay the appellants' action in the circumstances before him was equivalent to the granting of relief to the appellants. This, therefore, gave the motions judge the jurisdiction to impose security for costs as a condition of the granting of that relief pursuant to rule 56.09. The respondents further argue that the appellants' request to Nordheimer J. as case management judge, prior to the motion, regarding their right to re-schedule examinations for discovery amounted to a request for relief or at least an indulgence that was sufficient to invoke the court's jurisdiction under rule 56.09. As authority for their position, they rely on the case, Sydlo Inc. v. Mixing Equipment Co. (No. 3) (1987), 18 C.P.C. (2d) 79, 22 O.A.C. 231 (Div. Ct.), at p. 82 C.P.C.

[51] On the last issue, the respondents argue that Nordheimer J. as the case management judge on this matter had an accumulated knowledge of the case gained from his prior involvement in it. He rightfully and correctly considered the whole of the conduct of the appellants and the plaintiff, Shelly Khan, throughout the action. Based on that experience and knowledge, he was correct in concluding that the arrangements between the appellants and Shelly Khan gave rise to "significant opportunity to misuse the process of the court". In light of [page150] this, he did not stay the appellants' action but only awarded security for costs against them. In all of the circumstances of the case, the motions judge cannot be said to have acted unfairly or unreasonably to the appellants.

Analysis

Issue I: The interplay between s. 12 and the Rules of Civil Procedure

[52] As one embarked upon the very difficult task of the legal analysis and the attempt to reconcile in a jurisprudential, principled way the very divergent positions of the parties on this issue, it became evident that there was a paucity of binding jurisprudence that dealt directly with the issue in question, to be found. Because of this, it has been necessary to draw inferences and analogies from case law that deal with the issue, either peripherally or in the context of legislation comparable to the LSA such as Public Authorities Protection Act, R.S.O. 1990, c. P.38 ("PAPA").

[53] Counsel for the respondents are correct when they argue that there does not appear to be any clear legislative enactment or jurisprudence indicating that in libel and slander actions, where a defendant seeks an order for security for costs, s. 12 of the LSA exclusively governs the proceedings. A number of cases appear to support the position of the respondents that the two legislative regimes are meant to co-exist, and that a defendant in a libel action is not denied access to security for costs under the Rules merely because there is additional provision for security for costs under specific legislation. These cases appear to indicate that the moving party is free to choose relief under the Rules or the LSA. In Austin v. Torstar Corp., [2001] O.J. No. 3378 (QL) (S.C.J.), a defamation action, case management Master McLeod made a finding of fact of whether or not the plaintiff was ordinarily in Ontario for the purposes of deciding whether the defendant was entitled to an order for security for costs pursuant to rule 56.01(1)(a). Master McLeod, in para. 2 of his Endorsement, noted that the defendant in his motion did not rely on s. 12 of the LSA "which provides for security for costs -- whether or not a plaintiff is ordinarily resident in Ontario -- and imposes different tests". He went on to decide the case entirely under the Rules.

[54] In another libel case, only the LSA was relied upon for a request for security for costs against a plaintiff without any mention or regard for the comparable relief available under the Rules. See Whalen v. Ottawa Sun, [2001] O.J. No. 2751 (QL) (S.C.J.) (Master). [page151]

[55] In Christoffersen v. Cambridge (City), [1986] O.C.P. 34 (S.C.), Senior Master Rodger of the Supreme Court of Ontario had before him for consideration four motions for security for costs. In two of the motions, the grounds of the motion were rule 56.01(1)(f) and s. 14 of the PAPA (now s. 10). In one of the motions, the grounds of the motion were rule 56.01(c), (d) and (f) [O. Reg. 560/84], s. 20(1) of the LSA (now s. 12) and s. 14 of the PAPA.

[56] Rule 56.01(f) grants relief to a defendant or respondent for security for costs where it appears that "a statute entitles the defendant or respondent to security for costs". Section 14 of the PAPA is comparable legislation to s. 12 of the LSA, but deals with the prosecution of public officials acting under their public authority. Its wording, as can be seen from the following current legislation, is very similar to s. 12 of the LSA.

Security for costs

10. Where an action is brought against a justice of the peace or against any person for any act done in pursuance or execution or intended execution of any public duty, statutory or otherwise, or authority, or in respect of any alleged neglect or default in the execution of any such statute, duty or authority, the defendant may, at any time after the service of the writ, make a motion for security for costs if it is shown that the plaintiff is not possessed of property sufficient to answer the costs of the action in case a judgment is given in favour of the defendant, and that the defendant has a good defence upon the merits, or that the grounds of action are trivial or frivolous. R.S.O. 1990, c. P.38, s. 10.

[57] In the Christoffersen, supra, case, in each motion where rule [56.01(f)] and the applicable statute in question was relied on, Master Rodger decided the question of security for costs in accordance with the statutory tests outlined in the applicable legislation without further reference to any of the Rules.

[58] On the motion for security for costs, where the grounds for the motion relied on were both rule 56.01(c) (unpaid order for costs) and (d) (corporation insufficient assets in Ontario to pay costs) and (f) of the Rules and s. 20(1) of the LSA and s. 14 of the PAPA both the test under the Rules and the legislation were considered by Master Rodger in coming to his conclusion as to whether to grant or dismiss the motion. In fact, he appears to treat the Rules and legislation quite interchangeably as long as they have been relied upon in the motion. He states at p. 4 of his decision:

As to s. 20(1) of the Libel & Slander Act and s. 14 of the Public Authorities Protection Act, the statutory requirements are substantially the same.

Filed in support of this motion is the affidavit of the Defendant Claudette Millar, in which she deposes in paragraph 2 that "I have read the Affidavit of Vernon B. Copp, Q.C. and to the best of my knowledge it accurately and [page152] truly sets forth the facts related to this matter". On the strength of the affidavit of Vernon B. Copp, Q.C. filed in support of the motion by the Corporation of the City of Cambridge, I came to the conclusion, for the reasons expressed above, that "there is good reason to believe that the action is frivolous and vexatious" within the meaning of clause (e) of Rule 56.01. This defendant, however, is not moving under clause (e) of Rule 56.01 and, in my view, the affidavit of Vernon B. Copp, Q.C. relied upon by this defendant, falls far short of the statutory requirements of s. 20(1) of the Libel & Slander Act or s. 14 of the Public Authorities Protection Act, both of which require that it be "shown" that the action is "trivial or frivolous". Accordingly, in the absence of any evidence that the defendant has a good defence to this action on the merits, albeit that it is conceded that the plaintiffs are not possessed of property sufficient to answer the costs of the action, I have come to the conclusion that this motion must also be dismissed with costs to the plaintiffs in the cause.

[59] Unfortunately, in all of these cases, the question of the nature of the interplay between the Rules and the security for costs legislation in question was never addressed in any analytical way that may be helpful to the resolution of the issue before the court.

[60] An important consideration in this analysis is the Rules which expressly state that the court must defer to specific statutes where such legislation provides for the granting of security for costs. No other interpretation can be given to the wording found in those Rules. Rule 1.02(1)3 of the Rules clearly states that where a statute provides for a different procedure from the one set out in the Rules, the statute shall apply. The respondents argue that rule 1.02(1)3, despite its clear wording, will not oust the application of the rule by a statute that provides for a "different procedure" unless the statute is found to be necessarily inconsistent or in conflict with the procedure provided for under the Rules. They cite in support of this proposition the case of Metrin Mechanical Contractors Ltd. v. Big H Construction Inc. (2001), 10 C.P.C. (5th) 302, [2001] O.J. No. 1319 (QL) (S.C.J.), at p. 306 C.P.C., per Master Haberman. In my view, this position is not apparent, either from a reading of rule 1.02(1)3 or from the case cited.

[61] In Metrin Mechanical Contractors Ltd. v. Big H, supra, Master Haberman found that despite the procedure set out in s. 13 of the Solicitors Act, R.S.O. 1990, c. S.15 that applied to the facts of his case, she could still deal with the matter pursuant to the Rules. This was because the Solicitors Act did not "mandate" the exclusive use of that procedure.

[62] Rule [56.01(1)(f)] indicates that the court, on motion by the defendant or respondent, may make an order for security for costs, where a statute entitles the defendant or respondent to security for costs. As I read the wording of that rule, the entitlement to security for costs necessarily comes from the statute in [page153] question. Before the court may exercise its discretion under rule [56.01(1)(f)], the test established by the statute for the entitlement to security for costs necessarily applies and takes precedence over the Rule. This was certainly how Master Rodger in Christoffersen v. Cambridge (City), supra, dealt with the motions before him that relied on rule 56.01(f) and either s. 14 of the PAPA or s. 20(1) of the LSA. The test in the legislation was applied to determine whether the motions for security for costs should be granted or refused.

[63] Reiger v. Burrows (1987), 1987 4420 (ON SC), 58 O.R. (2d) 203, 14 C.P.C. (2d) 318 (Master) involved an action against a number of police officers for damages. The defendants moved for an order for security for costs pursuant to s. 14 of the PAPA. The specific question before Master Sandler concerned the defendant's right to examine the plaintiffs. In considering rule 56.01(f) in relation to the s. 14 of the PAPA, Master Sandler took it for granted that the specific statute, in that case the PAPA, had to be considered to determine the question of security for costs and the question of the defendant's right to examine the plaintiff in support of his motion for security for costs as a result of rule 56.01(f) which refers the court to the specific statute. He states, at pp. 205-06 O.R. of his decision:

Rule 56.01(f) really adds nothing to this problem since the rule refers back to the statute, in this case s. 14, which itself contains procedural provisions that must be interpreted and applied by me on this motion.

Rule 56 of the Rules of Civil Procedure is the general rule for security for costs that governs all Supreme Court and District Court actions in Ontario. In addition, there are some specific statutory provisions such as s. 20 of the Libel and Slander Act, R.S.O. 1980, c. 237, and s. 14 of the said Public Authorities Protection Act.

There are some specific statutory provisions dealing with security for costs, one being s. 20 of the Libel and Slander Act, and the other being s. 14 of the Public Authorities Protection Act. I had occasion to deal with s. 20 in Shewchun v. McMaster University et al. (1983), 1983 3093 (ON SC), 143 D.L.R. (3d) 238, 33 C.P.C. 35. It is clear that s. 20(2) of that statute specifically permits a plaintiff to be examined for the purpose of a motion for security for costs under s. 20(1). In a motion under that section, the defendant must show in an affidavit, inter alia, that the plaintiff is not possessed of property sufficient to answer the costs. What else a defendant has to show in order to succeed on a motion under s. 20(1) was discussed in Gunn v. North York Public Library Board et al. (1976), 1976 764 (ON SC), 14 O.R. (2d) 554, 2 C.P.C. 68, Nikolic et al. v. Northern Life Publishing Co. et al. (1976), 1 C.P.C. 335, and Molina v. Libman Manufacturing Ltd. et al. (1979), 15 C.P.C. 174.

[64] In the result in this decision, Master Sandler, finding under the Rules that the law did not permit the examination [page154] sought by the defendants, concluded that such examination was so permitted under the PAPA. He concluded, at p. 208 O.R.:

I thus conclude that the practice and procedure in a motion under s. 14 of the Public Authorities Protection Act, is different than that under rule 56.01(d) or (e), and that the defendant can examine the plaintiff as to his property and assets for the purposes of a motion under the section (as well as examine the plaintiff upon the merits of the action), and that such an examination under rule 39.03(1) can be held, and is not an abuse of process, and that the Drapeau case, supra, is distinguishable.

[65] The decision of Reiger v. Burrows, supra, is just one example of a case that has given primacy to a specific statute over the Rules in an area of concurrent legislation. There have been a number of others. Not all of the following cases deal specifically with security for costs and the LSA. However, I find them useful for the purpose of drawing analogies and extracting certain principles. In Clarke's Electrical Services Ltd. v. Gottardo Construction Ltd., [2001] O.J. No. 1517 (QL), 9 C.L.R. (3d) 14 (S.C.J.), Seppi J. of the Ontario Superior Court of Justice found that the Construction Lien Act, a remedial piece of legislation, provided for a different procedure in relation to the issue of joinder of actions that she had before her than did the Rules. Guided by rule 1.02(1)3, she applied the relevant section of the Construction Lien Act because of the nature and requirements of the action before her. She states [at paras. 30-31] of her decision:

Rule 1.02 provides that the Rules of Civil Procedure apply to all proceeding subject to certain exceptions, and 1.02(1)3 specifically states that "they do not apply if a statute provides for a different procedure".

In the case at bar, the CLA provides a different procedure for joinder. Due to the need for expedient and speedy resolution of lien claims, the CLA has restricted joinder to a limited class of claims for "breach of contract or subcontract". In keeping with the purpose of this special expedient procedure under the CLA, the terms "contract" and "subcontract" must be interpreted having regard to the purpose of the CLA. To hold otherwise would no doubt open the floodgates for joinder of unrelated claims without the essential connection to the lien claim which gives rise to the application of the CLA. Section, s. 55(1) of the C.L.A., while allowing all claims in relation to the contract or subcontract to be litigated within the lien action to avoid a multiplicity of these proceedings, nevertheless restricts this joinder in accordance with the definition of contract and subcontract in the s. 1(1) of the Act.

[66] Yet again, in Stone v. Metropolitan Toronto Housing Authority (1987), 1987 4029 (ON SC), 59 O.R. (2d) 605, 19 C.P.C. (2d) 31 (Dist. Ct.), the court was faced with a motion for security for costs brought pursuant to rule 56.01(c) (order against the plaintiff for costs that remain unpaid). In the context of the action before him, an application brought by a tenant of a residential premise for an abatement of rent from the respondent landlord, Matlow D.C.J. [page155] considered whether the Rules apply at all to summary applications brought pursuant to s. 113 of the Landlord and Tenant Act.

[67] He concluded that the Rules, by their own terms and by the language of the Landlord and Tenant Act, did not apply to the matter before him and that rule 56.01(c), therefore, had no application to the case. The motion was dismissed. How Matlow D.C.J. came to this conclusion is interesting. He states [at pp. 607-08 O.R.] of his decision:

The starting point for the determination of the basic question is the rules themselves. Rule 1.02(1) reads as follows:

1.02(1) These rules apply to all civil proceedings,

(a) in the Supreme Court of Ontario and the District Court of Ontario; and

(b) in the surrogate courts of Ontario, as provided in the Surrogate Courts Act,

except where a statute provides for some other procedure.

This calls for the determination of whether the Landlord and Tenant Act "provides for some other procedure" to be followed in "summary applications" brought pursuant to s. 113 of the Landlord and Tenant Act.

Rule 1.02(1) must be construed in accordance with rule 1.04(1) which reads as follows:

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

In my view, the Landlord and Tenant Act does so provide. In coming to this conclusion, I adopt the following statement of Henry J. in Berhold at p. 342:

In my opinion the summary application prescribed by the statute is not a proceeding in the nature of an action in which resort to the Rules of Practice as to pleadings, discoveries and productions and other pre-trial disclosures is envisaged. The intent of the Act is to avoid such proceedings and to allow the dispute between landlord and tenant to be resolved simply and expeditiously by a simple process analogous to an originating notice followed by a hearing at which viva voce evidence may be tendered as at a trial; but the procedure set up by the Act is entirely the creature of the statute.

Although the judgment in Berhold preceded the enactment of the Rules of Civil Procedure, the above-quoted observation is equally applicable with respect to them.

As much as anything in the Landlord and Tenant Act is clear, it is clear that Part IV of the Act includes an extensive self-contained code of the procedure that must be followed in s. 113 "summary applications". The obvious objective of this code is to provide for the determination of proceedings in this class of litigation in a more expeditious and economical manner than that followed in general civil litigation . . . . [page156]

[68] The above analysis is interesting and instructive because a logical question that naturally surfaces in the consideration of the issue before the court is whether the LSA can be considered an "extensive self-contained code" for libel and slander actions that might logically exclude the application of rules dealing with the same subject matter? Clearly, there is no certain and definitive answer to this question. There are just indices that, in my view, respond to the question in the affirmative.

[69] According to the Concise Oxford Dictionary, 10th ed. (New York: Oxford University Press Inc., 1999), at p. 276, the word "code" is "a set of conventions governing behaviour or activity in a particular sphere". A piece of legislation can be considered a code once it provides a comprehensive treatment or contains a comprehensive list of laws and procedures in that particular field. This was clearly why the Landlord and Tenant Act was found to be an "extensive self-contained code" in Stone v. Metropolitan Housing Authority, supra.

[70] Clearly, one cannot consider the LSA as a code in the same way that one might treat the Landlord and Tenant Act. However, when one examines the LSA in its entirety and some of the legislative history and antecedent sections as provided in the respondents' factum, one is struck by its legislative breadth. It addresses many issues that will arise as a result of a libel and slander action involving newspapers, be it the issue of damages, the requirements of the offences, evidence, defences, limitation periods, costs and, of course, interlocutory relief such as security for costs. The broad scope of the LSA supports the view that the Legislature intended the question of security for costs in libel and slander actions involving newspapers, such as the case at bar, to be governed entirely by s. 12 of the LSA.

[71] From another perspective, it is accepted that rule 56 is the general rule dealing with security for costs. The Rules are regulations to a statute, being the Courts of Justice Act and thus are subordinate to a statute and "limited in their construction to procedure only". See Armstrong v. Cambrian Equipment Sales Ltd. (1977), 1977 1188 (ON SCSM), 17 O.R. (2d) 33, 79 D.L.R. (3d) 622 (Small Cl. Ct.) at p. 36 O.R. and Friends of Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, 88 D.L.R. (4th) 1.

[72] In Reiger v. Burrows, supra, at p. 205 O.R., Master Sandler recognized the general nature of rule 56 as opposed to the specific statutory provisions found in the LSA and PAPA dealing with security for costs. For the reasons already discussed, he applied the specific legislation to the facts before him.

[73] It is a well-recognized principle of statutory interpretation that, where a statutory provision in specific legislation appears to [page157] conflict with a provision in a general statutory scheme, the specific legislation prevails. (See R. v. Greenwood (1992), 1992 7750 (ON CA), 7 O.R. (3d) 1, 70 C.C.C. (3d) 260 (C.A.), at pp. 6-7 O.R., leave to appeal to the Supreme Court of Canada refused, [1992] 1 S.C.R. viii. With a slightly different development on this principle, the Ontario Court of Appeal reinforced the concept of precedence of a specific rule over a general one in its decision Lana International Ltd. v. Menasco Aerospace Ltd. (2000), 2000 16845 (ON CA), 50 O.R. (3d) 97, [2000] O.J. No. 3261 (QL) (C.A.), at para. [19]. On the facts of that case that dealt with the question of which of two rules applied in the matter, there was not so much a conflict between the two rules as an uncertainty about which applies where both could apply. The court held at p. 102 O.R.:

Moreover, rule 39.04(2) is specific, precluding parties from using their own discoveries on a motion. Rule 20.01(3), on the other hand, is general, permitting the use of "other evidence." To the extent that there is any uncertainty about which rule applies to the use by parties of their own discoveries, the specific provision, Rule 39.04(2), should take precedence over the general: Ruth Sullivan, Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994), at p. 186.

[74] We have, in the case at bar, an uncertainty as to whether rule 56 or s. 12 of the LSA should apply. Applying the reasoning of the Court of Appeal in Lana International Ltd. v. Menasco Aerospace Ltd., supra, the LSA, being specific legislation to our matter should prevail.

[75] While one cannot say that there is a direct conflict between the procedures set out in rule 56 and those set out in s. 12 of the LSA, there is an unequivocal difference in the procedural requirements found under the LSA. The requirements under the LSA are definitely more onerous than that under rule 56. Specifically, under the LSA, an affidavit indicating the pecuniary position of the plaintiff is necessary. A good defence must be shown or that the plaintiff's claim is trivial. The test under the LSA is conjunctive. (See Gunn v. North York Public Library Board (1977), 1976 764 (ON SC), 14 O.R. (2d) 554 (H.C.J.).) The parties are permitted to conduct examinations for discovery to determine the extent and value of the plaintiff's assets and whether the latter would be able to pay the amount of any judgment awarded should the defendant be successful.

[76] In contrast to this, under rule 56, once "good reason" is shown to demonstrate the plaintiff's incapability of paying any judgment awarded or that the action is frivolous and vexatious (rule 56.01(1)(d) and (e)), that is sufficient to meet the test. No affidavit and certainly no examinations for discovery are required. (See John Wink Ltd. v. Sico Ltd. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, 15 C.P.C. (2d) 187 (S.C.J.) and [page158] Reiger v. Burrows (1987), 1987 4420 (ON SC), 58 O.R. (2d) 203 (Master) Based on the reasoning of the Ontario Court of Appeal in Lana International Ltd. v. Menasco Aerospace Ltd., supra, given the substantial difference in procedure and onus between the Rules as general legislation and the LSA as specific legislation, a strong argument can be made for having the LSA prevail in this matter.

[77] Finally, I must consider the argument that one should read the two pieces of legislation that deal with the same matter in conjunction with each other. In other words, one supplements the other as was done in the following two cases:

[78] In McNight v. Emmerson, [2002] O.J. No. 4240 (QL), [2002] O.T.C. 846 (S.C.J.), Pitt J. was dealing with a motion for security for costs under s. 10 of the PAPA. The specific issue before him was the defendant's right to examine the plaintiffs in aid of the motion for security for costs. Pitt J., in his reasons, appears to accept the principle that rule 56 and the specific legislation on security for costs that he was dealing with, namely, the PAPA, had to be read together. Rule 56, in his opinion, imported limitations on the exercise of s. 10 of the PAPA when he stated at [para. 11] of his decision:

It is to be remembered that the discovery sought is solely for the purpose of advancing the right provided for in section 10 of the Public Authorities Protection Act. That section itself contains some internal limitations in its exercise. In addition, it is exercisable only in accordance with the rules of Court, specifically rule 56.01, which imports some limitations on its exercise, albeit arguably less stringent.

[79] In Hunter v. Pittman, [1988] O.J. No. 478 (QL), 25 C.P.C. (2d) 145 (H.C.J.), Gravely J. held that even though the security for costs provision in the PAPA applied, the court still had a discretion under rule 56.05 (court's ability to give relief to a plaintiff against whom an order for security for costs has been made) to vary or amend the order if it were unjust or causing undue hardship.

[80] Senior Master Marriott concluded in his decision of Goudie v. Oliver, [1957] O.W.N. 575, that the Rules can supplement specific legislation by way of additional protection in circumstances not necessarily covered by the legislation. On the facts of that case, he was dealing with an action brought against the defendants who were police officers for damages for false arrest and false imprisonment. The defendant, Oliver, obtained a praecipe order for security for costs against the plaintiffs who resided outside Ontario. The plaintiffs attempted to set aside the order arguing, among other things, that the only manner in which an order for security for costs may properly be obtained by the defendant who was a public officer was pursuant to s. 14 of the PAPA. Section 14 read, at that time, as follows: [page159]

14. Where an action is brought against a justice of the peace or against any person for any act done in pursuance or execution or intended execution of any public duty, statutory or otherwise, or authority, or in respect of any alleged neglect or default in the execution of any such statute, duty or authority, the defendant may at any time after the service of the writ apply for security for costs if it is shown that the plaintiff is not possessed of property sufficient to answer the costs of the action in case a judgment is given in favour of the defendant, and that the defendant has a good defence upon the merits, or that the grounds of action are trivial or frivolous. R.S.O. 1950, c. 303.

[81] As can be seen from the above section, its wording is almost indentical to the current s. 10 of the PAPA and the current LSA. At p. 576 O.W.N. of his decision, Senior Master Marriott concluded that the praecipe order for security for costs was properly obtained under the Rules despite the application of the PAPA. To conclude otherwise would deprive the defendants of the "usual rights conferred upon all defendants being sued by a person residing out of the jurisdiction":

As to the first ground relied on, I am not satisfied that there is any real conflict between the provisions of the statute and the rule in question. Rule 373(a) applies generally to all persons commencing an action or certain other proceedings residing out of the jurisdiction, whereas s. 14 of The Public Authorities Protection Act was enacted to cover a special case where an action was commenced against a person carrying out a public duty and as it must be assumed that the Legislature in contemplating that such a section was desireable could not have intended to deprive such a person from the usual rights conferred upon all defendants when being sued by a person residing out of the jurisdiction. I think it must be found that the enactment of the said section was additional protection to such person and was to apply primarily to a case where the plaintiff resided within the jurisdiction.

[82] However, in a more recent decision, Van Riessen v. Canada (Attorney General), [1994] O.J. No. 2580 (QL), 35 C.P.C. (3d) 165 (Gen. Div.), Trafford J., for reasons that I found both compelling and persuasive, rejected the contention that on the issue of security for costs, rule 56.01(1)(a) should be read as supplementing s. 10 of the PAPA to apply to a plaintiff who resided outside Ontario.

[83] While the reasons given are very short and succinct, it appears that an issue arose as to whether the complete and conjunctive test under s. 10 of the PAPA (insufficient assets by the plaintiff and good defence on the merits or grounds of the action are frivolous) had to be met or whether merely establishing that the plaintiffs were ordinarily resident outside Ontario under rule 56.01(1) was sufficient.

[84] Trafford J. applied the complete and conjunctive test under s. 10 of the PAPA and granted the order for security for costs. At the end of his decision he concluded as follows [at p. 167 C.P.C.]: [page160]

Let me continue, however, and comment on the relationship between rule 56.01 and s. 10 of the Public Authorities Protection Act. Section 66(3) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides for rules supplementing an Act in respect of practice and procedure, but notes that it does not authorize the making of rules in conflict with an Act. Rule 56.01(1)(a) gives a discretion to the court to order security for costs where it appears the plaintiff is ordinarily resident outside of Ontario. Section 10 of the Act does not distinguish cases against the Crown by residents from those commenced by non-residents. To interpret rule 56.01(1)(a) as supplementing this provision is, I believe, to introduce a significant change to the scheme of s. 10. It is a change that affects not only the substance of the Act, but also the evidentiary and persuasive burdens in such cases. While one might conclude the position of the Crown as a defendant in a case where the plaintiff is a non-resident should be as set out in rule 56.01(1)(a), this, I believe, is a change to be introduced by the Legislature.

Disposition

[85] Based on the above examination of the jurisprudence and analysis, I come to the conclusion that s. 12 of the LSA should have been considered and applied to the facts of this case and not rule 56 and that it was an error in law not to have done so. The fact that neither counsel raised the issue before the motions judge, especially the appellant who now raised it for the first time on appeal, certainly contributed substantially to the error being made but does not render the decision for security for costs made under rule 56.09 instead of under s. 12 of the LSA a correct one.

[86] In view of the disposition of the first issue, it is unnecessary to deal with the other two issues raised on the appeal. Nonetheless, I make the following comments with respect to the last issue. Based on the evidence relating to the conduct of the appellants and the plaintiff, Shelly Khan, throughout the course of this litigation, the motions judge correctly concluded that there may have been and could be in the future an abuse of the court's process. We cannot find that he exercised his discretion in an unfair nor unreasonable manner.

[87] For the reasons given with respect to the first issue, the appeal is allowed. There will be an order rescinding the order for security for costs made by the motions judge. The respondents are permitted to bring another motion for security for costs under s. 12 of the LSA.

Costs

[88] Costs may be addressed in written submissions, those of the appellants' within 30 days, those of the respondents' within a further 20 days and any reply within a further seven days.

Order accordingly. [page161]