COURT OF APPEAL FOR ONTARIO

CITATION: Henderson v. Wright, 2016 ONCA 89

DATE: 20160201

DOCKET: M45958 (C60624)

Strathy C.J.O. (In Chambers)

BETWEEN

John Roy Henderson

Plaintiff (Appellant/

Responding Party)

and

Muriel Evelyn Wright

Defendant (Respondent/

Moving Party)

Robert Hammond, for the respondent/moving party

Clinton Culic, for the appellant/responding party

Heard: January 22, 2016

On motion for security of costs under r. 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

ENDORSEMENT

[1] The moving party, respondent on appeal, seeks an order for security for costs of the appeal under r. 61.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. She submits that there is good reason to believe the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal. She also submits that there are other good reasons to order security for costs.

[2] For the reasons that follow, I agree and order the appellant to post security for costs.

Background

[3] The appellant is the respondent’s former son-in-law. He claimed that he had an interest in a home that the respondent purchased in her name and in which he and his wife (the respondent’s daughter) lived, paying rent, for over 20 years.

[4] He claimed there was an agreement under which the respondent made the down payment – $55,000, of which the appellant contributed $5,000 – and he and his wife would then pay rent, which was to cover the mortgage, taxes and insurance. When the mortgage was paid off, he said, the house was to be transferred to him and his wife.

[5] The respondent’s version of events differed. She said her intention was to make a real estate investment that provided her daughter and son-in-law with a nice place to live at a favourable rent. The appellant’s contribution merely lowered the rent payable. She said she never intended to gift the amount of the down payment she paid, or promised to transfer ownership of the property to the appellant and her daughter once the mortgage was paid.

[6] The respondent also made several large annual lump sum mortgage payments, in addition to the regular monthly payments, to pay down the mortgage. These totalled $38,000. The mortgage was paid off seven years after the purchase of the property. The appellant claimed that he was not aware of this.

[7] Following the appellant’s separation from the respondent’s daughter, the appellant remained in the house, but did not pay rent. The respondent applied to the Landlord and Tenant Board to evict him, at which time the appellant claimed he had an ownership interest in the property based on the alleged agreement described above.

[8] The matter went to the Superior Court to determine whether the appellant had an ownership interest. Alternatively, the appellant relied on the equitable principle of promissory estoppel.

[9] The trial judge noted that the determination of the issues would require him to make findings of fact based on conflicting testimony. He instructed himself on the burden of proof.

[10] The trial judge accepted the respondent’s version of the events and rejected the appellant’s, which he found was not credible. He concluded that the respondent had not promised to transfer the property to the couple when the mortgage was paid off. He gave detailed reasons for his conclusion. He also rejected the claim based on promissory estoppel, finding that none of the requisite elements had been made out.

[11] The appellant appealed.

Discussion

[12] Rule 61.06 governs security for costs on appeal:

61.06 (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

I 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.

(2) If an appellant fails to comply with an order under subrule (1), a judge of the appellate court on motion may dismiss the appeal.

[13] The respondent argues an order to post security for costs is justified under r. 61.06(1)(a) or r.61.06(1)(c).

(1) Rule 61.06(1)(a) – Frivolous and vexatious claim with insufficient assets

[14] Under this rule, the appellate judge must (a) have good reason to believe the appeal is frivolous and vexatious, and (b) have good reason to believe the appellant has insufficient assets in Ontario to cover the costs of the appeal.

(i) Good reason to believe the appeal is frivolous and vexatious

[15] There is good reason to believe the appeal is frivolous and vexatious.

[16] This appeal does not raise any arguable error in law, and challenges findings of fact and credibility for which the trial judge set out detailed, facially sound reasons. This court has held that such appeals appear to have no merit: Schmidt v. Toronto Dominion Bank (1995), 1995 CanLII 3502 (ON CA), 24 O.R. (3d) 1.

[17] The appellant’s alleged error in law – his submission that the trial judge’s observations in paras. 40 and 41 of his reasons violates the rule in Browne v. Dunn – is, in my view, misconceived. That rule applies to counsel or a party who seeks to discredit a witness without having given the witness a fair opportunity to respond to the allegation. I do not believe it prevents a trial judge from asking himself a rhetorical question and then finding a witness’s evidence to be illogical or incredible based on the judge’s assessment of his or her behaviour in the circumstances. Counsel for the moving party could identify no authority for this proposition and I am aware of none.

[18] I also do not agree with counsel’s characterization of the judge’s findings as circular reasoning, or premised on his acceptance of the respondent’s evidence. The judge simply found that the appellant’s evidence did not make sense.

[19] The other grounds of appeal essentially challenge the trial judge’s findings of fact or inferences he drew from the facts. At trial, the parties gave conflicting versions of events, and the case was decided on the basis of the trial judge’s assessment of the credibility and reliability of the witnesses’ evidence. As I said, the trial judge gave detailed and apparently sound reasons for his findings. In such cases, there is almost no possibility of successfully overturning the result.

[20] Combined with the appellant’s less than diligent pursuit of his litigation – waiting until he was served with an eviction application to start his claim, appealing the post-trial Landlord and Tenant Board eviction order on the last day, abandoning that appeal, refusing to pay costs after that appeal until ordered to do so, and appealing the trial decision on the second last day – I am convinced that this appeal appears to be frivolous and vexatious.

(ii) Good reason to believe appellant has insufficient assets in Ontario

[21] I turn to the second branch of the test, which asks whether the appellant has sufficient assets in Ontario to pay the costs of the appeal.

[22] The appellant’s only asset of any significance (apart from a 9-year old car and a 12-year old motorcycle) is a one-quarter interest in a cottage property, which he owns with other family members. That interest is allegedly worth $50,000.

[23] I have doubt about the marketability of a part-interest in a family cottage, which could probably only be realized – if at all – after litigation. Even assuming one could execute against the part interest, one would be acquiring a lawsuit and potentially a liability. Moreover, this leaves nothing for the outstanding judgment and costs.

[24] Requiring the respondent to rely on such an illiquid and unmarketable asset is contrary to the purpose of r. 61: namely, “that a respondent is entitled to a measure of protection for costs incurred and to be incurred in the proceeding, which is now on appeal”: Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, 268 O.A.C. 172 (In Chambers).

[25] I therefore find the appellant has insufficient assets in Ontario to pay the costs of the appeal. The respondent has satisfied r. 61.06(1)(a).

(2) Rule 61.06(1)(c) – Other good reason to order security for costs

[26] Had I found that the appeal had a low prospect of success, but did not appear to be frivolous and vexatious, I would have ordered the appellant to post security for costs nonetheless under r. 61.06(1)(c).

[27] Appellate courts in Ontario have ordered security for costs when an appeal has a low prospect of success coupled with an appellant who has the ability to pay costs but from whom it would be nearly impossible to collect costs: see Perron v. Perron, 2011 ONCA 776, 345 D.L.R. (4th) 513; Baker v. Rego, 2013 ONSC 3309, 31 R.F.L. (7th) 323 (Div. Ct.); and Children’s Aid Society of York Region v. G.S., 2010 ONSC 3804, 98 R.F.L. (6th) 179.

[28] This “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: see Perron, at paras. 22-23.

[29] In my view, this “good reason” applies in this case.

[30] As I noted above, the appellant’s assets do not protect the respondent from the risk he will not satisfy the costs of the appeal. On the other hand, the assets may provide the appellant with the means to post security for costs.

[31] In addition, the appellant, who works as a bartender, acknowledged that he is paid in cash. The trial judge found as fact that there was little or no proof of the appellant’s income. Indeed, the appellant relied on this consideration to explain why the house purchase transaction took place the way that it did in his version of events. At trial, the appellant gave evidence that he earned at least $500 a week, the amount of cash he gave weekly to his former wife for rent and other expenses. That income, while providing him a basis to pay costs, would be nearly impossible for the respondent to garnish to satisfy costs.

[32] I am satisfied that the appellant’s assets and employment income provide him a basis to pay costs – thus ensuring he is not denied access to justice – but that the nature of those assets and income present an undue risk that the respondent would be unable to collect costs.

[33] Considering the low merit of the appeal, remedying the imbalance between the appellant’s relative invulnerability to costs awards and the respondent’s corresponding exposure provides a good reason to order the appellant to post security for costs in this case.

Disposition

[34] For these reasons, I order that the appellant post security for costs in the amount of $15,000.00 within 60 days of the date of this order, failing which a judge of this court may dismiss the appeal on motion.

[35] If counsel are unable to resolve costs of this motion, they may make written submissions, limited to five pages, excluding the costs outline, within 30 days.

“G.R. Strathy C.J.O.”