Court File and Parties
COURT OF APPEAL FOR ONTARIO DATE: 20221201 DOCKET: M53740 (C70711)
Favreau J.A. (Motion Judge)
BETWEEN
Lisa Laurette Gauthier, Estate Trustee for the Estate of Yvan Gauthier Plaintiff (Respondent/Moving Party)
and
John Harold White Defendant (Appellant/Responding Party)
Counsel: Jordan R.D. Lester, for the moving party Michael Cupello, for the responding party
Heard: November 22, 2022
Endorsement
[1] The moving party, who is the respondent on the appeal, brings a motion for security for costs on a pending appeal pursuant to r. 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. For the reasons below, the motion is granted.
Background
[2] The appeal arises from a dispute over the enforcement of an agreement of purchase and sale in relation to a property in Longlac, Ontario.
[3] The late Yvan Gauthier [1], who was the plaintiff in the action, brought a claim to enforce an agreement of purchase and sale. Mr. Gauthier claimed that the appellant, John Harold White, agreed to sell him the property for $40,000. This was the amount Mr. White owed in property taxes at the time the two men made a verbal agreement for the sale of the property.
[4] Mr. Gauthier made cash payments totalling $40,000 to Mr. White and started some repair work on the property before the parties entered into a formal agreement of purchase and sale. In May 2018, the agreement of purchase and sale was prepared by a law firm acting for Mr. Gauthier and Mr. White. [2] The agreement stated that the purchase price was $40,000 and the purchaser was to provide a deposit of $40,000 to the vendor. The agreement did not reflect that Mr. Gauthier had already paid $40,000 to Mr. White.
[5] Around the time when the sale was supposed to close, Mr. White discovered that there was a mortgage for $25,000. He had thought the mortgage was for approximately $5,000.
[6] On the date of closing, Mr. White refused to close, claiming that the parties had agreed to a purchase price of $80,000.
[7] Mr. Gauthier brought an action against Mr. White for specific performance or for a vesting order. Mr. White counterclaimed, seeking in part a declaration that the purchase price was to be $80,000.
[8] The trial proceeded before Newton J. In a decision dated April 28, 2022, the trial judge granted the vesting order sought by Mr. Gauthier and dismissed Mr. White’s counterclaim. In reaching this outcome, the trial judge held that he was “unable to accept Mr. White’s evidence that he believed that the purchase price was $80,000.” He further found that Mr. White “only sought additional funds for the purchase after he discovered that the mortgage was more than he thought.” The trial judge stated that he accepted Mr. Gauthier’s evidence and did not accept Mr. White’s evidence on the purchase price.
[9] Mr. White appeals the trial decision. Mr. White advances several grounds of appeal, but they are essentially that the trial judge erred in his interpretation of the agreement of purchase and sale. He points out that the agreement required the payment of $40,000 within 24 hours of acceptance, which was to be credited to the purchase price. The agreement also does not refer to the $40,000 already paid to Mr. White. On this basis, he argues that Mr. Gauthier was required to pay an additional $40,000. Given that the agreement contained an “entire agreement” clause and that there was no ambiguity in the agreement, the trial judge erred in considering evidence of verbal discussions between Mr. Gauthier and Mr. White before they entered into the agreement of purchase and sale and in deciding the case based on a credibility assessment.
Discussion
[10] Rule 61.06 of the Rules of Civil Procedure provides that the court may order security for costs in specified circumstances:
(1) In an appeal where it appears that,
(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;
(b) an order for security for costs could be made against the appellant under rule 56.01; or
(c) for other good reason, security for costs should be ordered,
a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just.
[11] In Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 23, this court stated that, besides considering the specific factors in rr. 56 and 61, before making an order for security for costs, courts should consider whether “the justness of the case demands it.” In making this determination, as held at para. 25 of Yaiguaje, “each case must be considered on its own facts…. The correct approach is for the court to consider the justness of the order holistically, examining all the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.”
[12] In this case, the moving party argues that the court should make an order for security for costs on three grounds:
a. There is good reason to believe the appeal is frivolous and vexatious and Mr. White has insufficient assets in Ontario to pay costs;
b. At the time the motion was initiated, Mr. White owed $500 pursuant to an unpaid costs order; and
c. The appeal has a low prospect of success and it will be nearly impossible for the moving party to collect costs against Mr. White.
[13] In my view, the appeal is not frivolous or vexatious, and the outstanding costs order does not justify granting security for costs. However, I find that the appeal has a low prospect of success and the moving party has put forward persuasive evidence that it will be nearly impossible to collect costs from Mr. White. In the circumstances, the justness of the case requires an order for security for costs on this appeal.
(1) The appeal is not frivolous and vexatious
[14] The test under r. 61.06(1)(a) is conjunctive. The moving party must show that there is reason to believe that the appeal is frivolous and vexatious and that the responding party has insufficient assets in Ontario.
[15] In my view, this aspect of the motion can be resolved on the first part of the test. I do not find that the appeal is frivolous and vexatious. Contrary to the arguments made by the moving party, the appeal does not just turn on issues of credibility. Rather, the appeal raises legitimate issues regarding the interpretation of the agreement of purchase and sale. In his reasons, the trial judge did not set out the principles of contract interpretation nor did he explain why he focused on the parties’ credibility rather than the terms of the agreement. This does not mean that the appeal will succeed or even that the appellant has strong arguments on appeal. However, I am not persuaded that the appeal is frivolous and vexatious.
(2) The unpaid costs order does not justify an order for security for costs
[16] As indicated above, the court can make an order for security for costs on a pending appeal on the grounds listed in r. 56.01(1), which sets out the grounds where a court can make an order for security for costs in any proceeding. One of the grounds is where “the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part”.
[17] In this case, at the time the motion was brought, Mr. White had not yet paid an outstanding costs order for $500 on a refusals motion. Mr. White paid those outstanding costs before this motion was heard.
[18] The moving party still seeks to rely on the outstanding costs order as a basis for the court to order security.
[19] In my view, on its own, this outstanding costs order does not justify an order for security for costs. The amount is relatively small. There is no evidence that the moving party made a demand for payment prior to bringing the motion. Mr. White has now paid the outstanding costs.
(3) There is other good reason to make an order for security for costs
[20] On a motion for security for costs pending appeal, pursuant to r. 61.06(1)(c), the court has a residual discretion to make an order for security for costs where there is good reason to make such an order. One of the circumstances where the court may exercise this discretion is where the appeal has a low prospect of success, and the appellant could pay costs but it would be “nearly impossible” for the respondent to collect those costs: Henderson v. Wright, 2016 ONCA 89, 345 O.A.C. 231, at para. 27. As Strathy C.J.O., as he then was, stated in Henderson, at para. 28, “[t]his ‘good reason’ balances the need to ensure an appellant is not denied access to the courts, with the respondent’s right to be protected from the risk the appellant will not satisfy the costs of the appeal”.
[21] In this case, I am satisfied that Mr. White has a low prospect of success on appeal and that the evidence supports a finding that it will be “nearly impossible” to collect costs from him if the court dismisses his appeal.
[22] While the appeal is not frivolous, the prospects of success are low. At most, it appears that there may be an ambiguity in the agreement of purchase and sale that must be resolved. The agreement does not state that the purchase price is $80,000. Rather, it refers to a purchase price of $40,000 with a deposit of $40,000 to be made within 24 hours. Given that Mr. Gauthier had already paid $40,000 to Mr. White, there may be an ambiguity in the agreement that could be resolved through the parol evidence considered by the trial judge. In any event, while the appeal may not be frivolous, it does not appear to be strong.
[23] In addition, there is very compelling evidence that it may be nearly impossible to collect costs from Mr. White. I say this for three reasons.
[24] First, in his affidavit, Mr. White does not claim that he is impecunious or that he would be unable to pay a costs order. However, the only assets he refers to are a very small pension and scrap vehicles which he says he is trying to sell to raise money. As held in Henderson, at para. 24, a party should not be able to rely on illiquid assets with a questionable market value to defeat a motion for security for costs. While Mr. White may be able to raise the funds to pay an order for security for costs with the proceeds from the sale of the scrap cars, the moving party should not be placed in the position of having to enforce a costs order against those illiquid assets if the appeal is dismissed.
[25] Second, Mr. White did not pay the $500 costs order from the refusals motion until this motion was brought. While the unpaid order on its own may not justify an order for security for costs, it does provide some evidence that Mr. White will not voluntarily pay any costs orders made against him.
[26] Third, on this motion, the moving party has provided evidence that Mr. White failed to make outstanding mortgage payments totalling approximately $10,000 since the trial. Ultimately, in order to avoid foreclosure on the property, the moving party paid off the mortgage. This was an amount owed by Mr. White to the bank, and not owed by the moving party. Yet, there is no evidence that Mr. White tried to pay off the mortgage, other than a bald statement in his affidavit that he thought the payments were up to date. There is also no evidence that Mr. White has since taken any steps to reimburse the moving party for this amount. While the outstanding mortgage payments are not costs orders, they nevertheless show Mr. White’s history of non-payment in the context of these proceedings. In my view, this provides additional very compelling evidence that Mr. White will not voluntarily pay any costs orders made against him.
[27] In the circumstances, I am satisfied that there is good reason to make an order for security for costs in this case. The prospects of success appear weak and it appears that it may be nearly impossible for the moving party to collect on a costs order.
(4) The justness of the case supports an order for security for costs
[28] Based on the evidence, this is not a case in which Mr. White will not be able to pursue an appeal if the court makes an order for security for costs. His evidence is that, if he sells the scrap cars, as he plans to do, he will be able to pay costs if he is unsuccessful on appeal. He does not claim that he is impecunious. [3]
[29] Nevertheless, given all the circumstances I have reviewed above, I have concluded that the justness of the case requires Mr. White to post security for costs. Given that the chances of success on appeal are low, that there are no immediate assets to satisfy a costs order and that Mr. White has a history of non-payment of his mortgage and costs, I am satisfied that the moving party should be protected from incurring further costs without some assurance that the costs can be recovered if the appeal is dismissed.
Disposition
[30] The motion is granted, and I make the following order:
a. Mr. White is to post security for costs in the amount of $15,000 by January 5, 2023;
b. The appeal is stayed until Mr. White posts security for costs; and
c. If Mr. White fails to post security for costs by January 5, 2023, the moving parties may bring a motion to dismiss the appeal pursuant to r. 61.06(2).
[31] As agreed between the parties, the moving party is entitled to $1,500, inclusive of disbursements and HST, for the costs of the motion.
“L. Favreau J.A.”
Footnotes
[1] Mr. Gauthier died after the trial, and his estate is the respondent on appeal.
[2] The parties did not provide a copy of the agreement of purchase and sale in their materials on the motion. Therefore, all descriptions of the agreement are based on the trial judge’s reasons and assertions about the agreement in Mr. White’s factum on appeal.