Know Your City Inc. v. The Corporation of the City of Brantford

CITATION: Know Your City Inc. v. The Corporation of the City of Brantford, 2020 ONSC 7364

DIVISIONAL COURT FILE NO.: 214/20 DATE: 20201130

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

Know Your City Inc. Applicant/Respondent on the Motion

– and –

The Corporation of the City of Brantford Respondent/Moving Party

COUNSEL: Eric Gillespie and Kathleen Coulter, for the Applicant/Respondent on the Motion Brian Duxbury and Joshua Perell, for the Respondent/Moving Party

HEARD at Toronto by videoconference: November 25, 2020

Favreau J.

Overview

[1] The Corporation of the City of Brantford (the “City”) brings a motion for $20,000 in security for costs in the context of an application for judicial review. The application is scheduled to be heard on December 11, 2020.

[2] The applicant, Know Your City Inc. (“Know Your City”), concedes that the City has demonstrated that there is reason to believe it has insufficient assets to pay costs, but argues that it should not be required to pay security for costs because it has a good chance of success on the application and because this is public interest litigation. It also argues that there has been undue delay on the City’s part in bringing the motion.

[3] Balancing the relevant factors, I find that it is just to require Know Your City to pay security for costs. Know Your City has not established that it has a good chance of success on the application or that this is public interest litigation.

[4] Accordingly, I am satisfied that Know Your City should pay security for costs in the amount of $10,000. Given the City’s delay in bringing the motion for security for costs, this is a fair amount in the circumstances and is to be paid into court by no later than December 4, 2020.

Background

Application for judicial review

[5] Know Your City started the application for judicial review on August 13, 2020. The application seeks an order quashing a resolution made by City Council to sell lands that include the Arrowdale Municipal Golf Course.

[6] The application for judicial review is scheduled to be heard by a panel of the Divisional Court on December 11, 2020. The parties have served and filed all materials on the application.

[7] Corbett J. has been case managing the application for judicial review. He has held three case conferences. The issue of whether the City would bring a motion for security for costs was first raised at a case conference on August 26, 2020, and the motion was ultimately scheduled for November 25, 2020, at the third case conference held on October 22, 2020.

Evidence on the motion

[8] The City filed an affidavit sworn by a lawyer with the City in support of the motion. The City’s affidavit sets out the following evidence:

a. Know Your City was incorporated under the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16 on July 27, 2020.

b. Ronald Heaslip is a director of Know Your City. Mr. Heaslip swore the affidavit in support of Know Your City’s position on the application for judicial review. Mr. Heaslip’s residence is Know Your City’s registered address. The residence is less than two kilometers away from the golf course.

c. Mr. Heaslip maintains a Facebook page on which he seeks donations to fund the legal fees for the application for judicial review.

d. Veronica Martisius is also a director of Know Your City. She has set up a gofundme.com page seeking donations for the litigation. The page recorded that it raised $3,625.00 as of October 26, 2020.

[9] The applicant has filed no evidence in response to the motion.

[10] On the application itself, the evidence about Know Your City is very limited. In his affidavit, Mr. Heaslip states that he is a director of Know Your City. The only information Mr. Heaslip provides about Know Your City is its registered address and that it was incorporated in Ontario. On cross-examination, when asked whether Know Your City carries on business, Mr. Heaslip responded:

As far as financial business, no. We carry on only as an advisory that – of people that want to know basically the workings of how to pose questions and get answers.

Test to be applied

[11] Rule 56 of the Rules of Civil Procedure gives the Court the power to make an order for security for costs in specified circumstances. In this case, the City relies on Rule 56.01(d):

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

(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…

[12] There is no dispute between the parties that the City has met its onus of proving that there is good reason to believe that Know Your City has insufficient assets in Ontario to pay costs to the City. However, the parties disagree on the next step in the analysis.

[13] The City argues that it has the initial onus of proving that there is good reason to believe that Know Your City has insufficient assets. Once it has met this onus, the burden shifts to Know Your City to prove either that it has the assets necessary to pay costs or that it is impecunious and that there is some merit to the application.

[14] Know Your City argues that the court should take a more holistic approach. Even if it cannot prove impecuniosity, it can avoid an order for security for costs if it can demonstrate that it has a good chance of success on the application.

[15] I agree with Know Your City that the test the City urges me to apply is outdated. More recent cases dealing with security for costs have established that, once the moving party has met the relatively low burden of proving that there is reason to believe that a corporation cannot pay a costs order, the court is not limited to looking at whether the applicant can prove that it has assets to pay costs or that it is impecunious. Rather, the court is to look at a multiplicity of factors to determine whether it is just to order security for costs in the circumstances of the case. At this stage, the merits of the case are always relevant. However, I do not agree with Know Your City that only the merits are relevant if it cannot prove that it has assets or that it is impecunious. Rather, the proper approach is to look at all the circumstance, including the merits and including evidence of the applicant’s financial circumstances.

[16] In Coastline Corporation Ltd. v. Canaccord Capital Corporation, 2009 21758 (Sup. Ct.), at para. 7, Master Glustein, as he then was, set out a framework for deciding whether an order for security for costs is appropriate. The framework includes a category of cases in which a plaintiff cannot establish impecuniosity but can meet a high threshold on the merits of the litigation:

(i) The initial onus is on the defendant to satisfy the court that it “appears” there is good reason to believe that the matter comes within one of the circumstances enumerated in Rule 56.01 (Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119 (H.C.J.) at 123);

(ii) Once the first part of the test is satisfied, “the onus is on the plaintiff to establish that an order for security would be unjust” (Uribe v. Sanchez (2006), 33 C.P.C. (6th) 94 (Ont. S.C.J. – Mast) (“Uribe”) at para. 4);

(iii) The second stage of the test “is clearly permissive and requires the exercise of discretion which can take into account a multitude of factors”. The court exercises a broad discretion in making an order that is just (Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175 (S.C.J.) at para. 12; Uribe, at para. 4);

(iv) The plaintiff can rebut the onus by either 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

(See Willets v. Colalillo, [2007] O.J. No. 4623 (S.C.J. – Mast.) at paras. 46, 47, and 55; Uribe, at para. 5; Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at para. 50; Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP, [2007] O.J. No. 4096 (S.C.J. – Mast.) (“Bruno”) at para. 35). [Emphasis added]

[17] In Zeitoun v. Economical Insurance Group, 2008 20996 (ON SCDC), 91 OR (3d) 131 (Div. Ct.), aff’d 2009 ONCA 415, at para. 50, this Court recognized this third category of cases and explained the rationale for applying a higher merits threshold:

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.

[18] More recent cases have stated that the merits are always relevant to the analysis, but that ultimately the second stage of the analysis requires the court to look at all the circumstances to determine whether it is just to order security for costs. For example, in Cigar500.Com Inc. v. Ashton Distributors Inc., 2009 46451 (ON SC), 99 OR (3d) 55 (Sup. Ct.), in the context of an appeal from a Master’s decision ordering security for costs, Code J. held that the Court should look at all the circumstances, including the merits and the financial circumstances of the corporation’s shareholders:

[68] In any event, the Court’s decision in Zeitoun is simply the culmination of a clear trend or evolution in the modern Rule 56.01 case law towards flexible consideration of the merits at the second stage of analysis. A number of the pre-Zeitoun decisions, cited above to this effect, involved corporate Plaintiffs on Rule 56.01(1)(d) motions. See, for example: Bruno Appliance and Furniture Inc., supra; Treats Inc., supra; Aviaco, supra; and Crudo Creative Inc., supra.

[69] For all these reasons, I am satisfied that Zeitoun is a binding decision to the effect that the merits of a Plaintiff’s claim remain a relevant factor at the second stage of Rule 56.01 analysis, even when the Plaintiff is not “impecunious.” Furthermore, this principle applies generally to Rule 56.01 motions, including to corporate Plaintiffs under Rule 56.01(1)(d). This is not to say that the Courts will not take a stricter approach to corporate Plaintiffs who lack assets in Ontario but who have wealthy shareholders. Indeed the courts are likely to give considerable weight to this factor for the policy reasons set out by Nordheimer J. in Aviaco, supra. In this regard, it is to be remembered that the burden in Zeitoun for a Plaintiff who is not “impecunious” is a high one. It must establish that its claim “has a good chance of success.” Furthermore, this remains only one factor to be balanced with other relevant factors, such as the existence of “wealthy shareholders [who] have decided to carry on business and litigation through a shell corporation”, as Sutherland J. put it in Smith Bus Lines Ltd., supra at 705. All of these factors should be considered at the second stage inquiry under Rule 56.01. [emphasis added]

[19] Similarly, in K. Lee & Associates Ltd. v. Lee, 2019 ONSC 10, at paras. 50-51, Master Short stated that, in deciding a motion for security for costs, a court “may consider all matters which will be of assistance in making a ‘just’ Order, which may include the merits of the case” and that “the merits of the case are only one consideration in making an Order for Security for Costs as is just and are by no means determinative”.

[20] Accordingly, while I agree with Know Your City that it does not have to prove impecuniosity to avoid an order for security for costs and that the merits of the case are relevant, I do not agree that only the merits are relevant. Rather, in deciding what is just, I must look at all the circumstances.

[21] Therefore, as set out below, I first consider the merits of the application for judicial review, and then turn to consider whether it is just in this case, having regard to all the circumstances, to make an order for security for costs.

Merits of the application for judicial review

[22] As reviewed above, where a party has not demonstrated impecuniosity, in order to avoid an order for security for costs, the party must show that it has a “good chance of success”.

[23] In such cases, I agree with Know Your City that the court should not embark on an assessment of credibility or approach the case as though it were a motion for summary judgment: Coastline Corporation Ltd., at para. 7.

[24] However, the issues in this case do not engage matters of credibility and, unlike cases where a party seeks security for costs early in the litigation, here I have the benefit of the full record and facta that will be before the panel on the application for judicial review. I am therefore in a good position to assess whether the applicant has a good chance of success.

[25] Know Your City challenges the City’s resolution on three grounds:

a. City Council failed to follow its own procedural bylaws in making the motion that led to the resolution;

b. The City failed to give notice to the First Nations; and

c. City Council demonstrated a closed mind.

[26] Know your City may ultimately succeed on the application for judicial review, but I am not satisfied that it has a good chance of success on any of the three grounds it raises.

Issue 1: Reconsideration Procedure

[27] With respect to the first issue, Know Your City claims that City Council breached its own procedural by-laws by making conflicting resolutions without following the process for reconsideration.

[28] At a meeting on November 23, 2019, the City received a report from KPMG that listed “Top 13 Opportunities” for “improved efficiency and effectiveness in the delivery of City Services”. One of the opportunities KPMG identified in the report was to “explore the sale of the Arrowdale golf course”. City Council voted at the meeting to receive the report and that staff be directed “to bring a report to Council in Q1 2020 outlining a plan and timeline to address the opportunities contained” in KPMG’s report.

[29] On the same day, after that motion was passed, one of the Councilors made a motion to approve the sale of the golf course.

[30] The motion was placed on the agenda for the next City Council meeting on December 10, 2019. City Council ultimately voted on the resolution at a meeting on December 17, 2019. The resolution passed by a vote of 8 to 3.

[31] Know Your City argues that this second motion made at the meeting on November 23, 2019, breached the City’s by-laws related to the process for reconsideration of a previous resolution. The relevant portions of the by-law are as follows:

15.8.16 Motion to reconsider

After any motion, except one of indefinite postponement has been decided, a member who voted in the majority on a motion may move or give notice for a reconsideration of the matter. The seconder of the motion to reconsider must also be someone who voted in the majority on the motion to be reconsidered. Where previous notice has not been provided, a motion to reconsider will be carried by a two-thirds majority of the members present and voting.

15.8.17 Motion to reconsider discussion

No discussion of the main motion that is proposed for reconsideration shall be allowed until the motion to reconsider is carried…

[32] On its face, in this case, it is hard to see how the second motion is the same as the first motion or that the motions are in conflict. The first motion relates to 13 different opportunities in KPMG’s report, including the sale of the golf course. The second motion focuses on the golf course and simply gives the City permission to move forward with the sale of the golf course.

[33] In addition, the by-law sets out a process for Council members to request a reconsideration of matters on which Council has already voted. It does not preclude Council members from bringing forward motions on similar or related topics.

[34] In any event, not all procedural breaches warrant a remedy. Even if this was a breach of the City’s by-laws, Know Your City does not argue that members of the public were not given an opportunity to voice their concerns about the sale of the golf course. On the contrary, Mr. Heaslip was present at the meeting on December 17, 2019 and was able to make representations about his views on the sale of the golf course.

[35] Accordingly, I am not satisfied that Know Your City has a good chance of success on this ground.

Issue 2 – Notice to the First Nations

[36] With respect to the second issue, Know Your City argues that the City did not meet its notice obligations under an agreement between the City on one hand and the Six Nations of the Grand River and the Missisaugas of the Credit on the other hand.

[37] The agreement provides that the City is to give notice to the First Nations when it sells any lands. The agreement sets out the timing of the notice and the information required in the notice.

[38] In this case, there is no dispute that the City did give notice to the First Nations, but Know Your City argues that the timing and disclosure did not accord with the requirements in the agreement. In response, the City argues that it met its commitments in the agreement but that, in any event, the agreement is not legally binding. The City also argues that Know Your City does not have standing to raise this issue.

[39] Setting aside the issue of whether the City met its notice obligations and whether the agreement is legally binding, in my view Know Your City does not have a good chance of success on this ground because of the standing issue.

[40] The alleged notice requirements do not arise from constitutional obligations but from an agreement between the City and the First Nations. Know Your City is not a party to the agreement. There is no evidence that the First Nations have any interest in this litigation. On the contrary, Know Your City’s application record includes evidence that the Six Nations of the Grand River was aware of the proposed sale well before receiving formal notice and that it did not intend to challenge the decision.

[41] During the motion before me, Know Your City relied on other decisions where community groups were given standing to advance the interests of a First Nations group. This does not mean that standing is appropriate in all cases.

[42] Based on the circumstances of this case, where the notice requirements arise from an agreement between the City and the First Nations, in circumstances where the First Nations have expressed no interest in challenging the sale of the golf course, I find it hard to see that Know Your City has a good chance of establishing that it has standing to raise the issue of notice under the agreement.

Issue 3 – Allegations of bias

[43] Know Your City relies on a number of emails to argue that the mayor and one councilor had a closed mind when they voted on the motion to sell the golf course.

[44] The case law is clear that the bar is high for demonstrating bias when dealing with the decisions of elected officials performing legislative functions. City Councilors are not disqualified from participating in a vote simply because they have already expressed views, even strong views, on a matter: Pattison Outdoor Advertising LP v City of Toronto, 2016 ONSC 2419 (Div. Ct.), at paras. 43-45. In order to succeed, Know Your City will have to show that Council members had closed minds and that their minds could not be changed, as described in Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), 1990 31 (SCC), [1990] 3 SCR 1170, at p. 1197:

…there is a prejudgment of the matter, in fact, to the extent that any representations at variance with the view, which has been adopted, would be futile. Statements by individual members of Council while they may very well give rise to an appearance of bias will not satisfy the test unless the court concludes that they are the expression of a final opinion on the matter, which cannot be dislodged. In this regard it is important to keep in mind that support in favour of a measure before a committee and a vote in favour will not constitute disqualifying bias in the absence of some indication that the position taken is incapable of change. The contrary conclusion would result in the disqualification of a majority of Council in respect of all matters that are decided at public meetings at which objectors are entitled to be heard.

[45] In this case, the allegations of bias only target the Mayor and one Council member. In addition, the City has put forward evidence that, following the debate on December 17, 2020, the Mayor moved to exclude some of the golf course lands from the sale.

[46] Under the circumstances, based on the high bar to be met and the available evidence, I cannot say that Know Your City has a good chance of success on the bias issue.

Whether it is just to make an order for security for costs

[47] As reviewed above, in deciding whether it is just to make an order for security for costs, the court is to look at all of the circumstances, including the merits of the case. Based on my review of the circumstances, I find that it is just in this case to make an order for security for costs.

[48] The City has established, and Know Your City concedes, that there is reason to believe that Know Your City does not have the assets needed to pay a costs award.

[49] As reviewed in the previous section, based on my review of the law and the record, I do not find that the applicant has a good chance of success. This is not a case in which it would be unfair to impose an order for security for costs in the face of a case that is likely to succeed.

[50] It is evident that Know Your City was established just before the commencement of this proceeding and its sole purpose appears to be to pursue this application for judicial review. While Know Your City relies on Mr. Heaslip’s statement on cross-examination that the corporation’s purpose is to help people understand the workings of “how to pose questions and get answers”, given the date of incorporation and this vague statement, Know Your City’s purpose is clearly to proceed with this litigation. It may be that Mr. Heaslip and Ms. Martisius do not have the means to pay an order for security for costs or the ability to raise further funds, but without the benefit of any evidence from them on this point, I cannot make that determination, and, given my finding on the merits, I find that it is just to order security for costs in this case.

[51] Know Your City argues that I should not grant the motion because this is public interest litigation. It is unclear whether Know Your City advances this argument as a standalone basis for avoiding an order for security for costs or as part of the argument that it would be unjust to order security for costs. Either way, I do not accept that this is public interest litigation. In Pointes Protection Association v. Sault Ste. Marie Region Conservation Authority, 2013 ONSC 5323, this Court dismissed an argument that the Court should not order security for costs on the basis that the matter involved public interest litigation. The issues in that case related to a proposed development and the Court found that they did not raise any precedent setting legal issues. Here, the underlying issue is whether the City should be permitted to sell a municipal golf course for the purpose of raising funds for public housing. Mr. Heaslip lives relatively close to the golf course and admitted golfing there. The issue of notice to the First Nations is one that could be raised by them if they had an interest in pursuing the litigation. The other issues raised are not of broader legal concern. Therefore, I do not find that this is public interest litigation such that it would be unjust to award security for costs.

[52] Accordingly, for the reasons above, I find it just to make an order for security for costs in this case.

Quantum of security for costs

[53] Courts have held that the timing of a motion for security for costs can affect whether security for costs should be ordered or the quantum of costs: see, for example, Charose Holdings v. Edible Arrangements International, 2014 ONSC 4185 (Master), at paras. 58-73.

[54] In this case, the issue of security for costs arose at the first case conference. At that time, Corbett J. said that a motion could be scheduled quickly. However, it appears that the City did not request that the motion be scheduled until October, and, by the time I heard the motion on November 25, 2020, all materials for the hearing had been prepared.

[55] In this case, the circumstances of the delay do not lead me to conclude that there should be no security for costs. The application for judicial review was scheduled on an expedited basis and Corbett J. specifically stated that he would not delay the scheduling of the application for the purpose of first scheduling the motion for security for costs. However, the motion could have been brought more quickly and it would have been fairer to the applicant to know whether it was required to post security for costs before incurring the expenses of preparing all of its materials and conducting cross-examinations.

[56] In the circumstances, exercising the court’s broad discretion in deciding an appropriate amount of security for costs, I order that Know Your City is to post $10,000 as security for costs in this case.

[57] Given that the hearing of the main application is imminent, this amount is to be posted by no later than 4:00 pm on Friday, December 4, 2020.

Conclusion

[58] In conclusion, the motion is granted and Know Your City is required to post security for costs in the amount of $10,000 by no later than 4:00 pm on Friday, December 4, 2020.

[59] As agreed between the parties, given that the City was not entirely successful on the motions, I make no order for costs.

___________________________ Favreau J.

Released: November 30, 2020