Zeitoun et al. v. The Economical Insurance Group

91 O.R. (3d) 131

Ontario Superior Court of Justice,

Divisional Court,

Lederman, Swinton and Low JJ.

May 6, 2008

Civil procedure -- Appeal -- Appeal from order of master -- Standard of review -- Same standard of review applying to appeals from master and appeals from judge -- Decision of master should only be interfered with if master made error of law or exercised his or her discretion on wrong principles or misapprehended evidence such that there was palpable and overriding error.

Civil procedure -- Security for costs -- Plaintiffs ordinarily resident outside Ontario -- Defendant moving for order for security for costs -- Master finding that impecuniosity was not made out and that she could not say that claim had good chance of success as plaintiffs had adduced no evidence in support of claim -- Motion judge erring in treating [page132] appeal from master's decision as hearing de novo and in substituting his view of evidence on question of impecuniosity for that of master -- Master's finding that impecuniosity was not made out entitled to deference -- Closer scrutiny of merits of case warranted where impecuniosity not made out.

The plaintiffs, who were ordinarily resident in Israel, brought an action against the defendant insurer relying on the uninsured/underinsured coverage in an automobile insurance policy. The defendant brought a motion before the case management master for an order for security for costs. The hearing proceeded on the assumption that the defendant had a prima facie right to security arising out of the non-residency of the plaintiffs. The master found that the plaintiffs had not been shown to be impecunious. On the merits of the case, she noted that no evidence was adduced to suggest that the at-fault driver in the motor vehicle accident was uninsured. She held that, based on the lack of evidence addressing the merits of the case and having regard to the statutory defences raised, she could not say that the claim had a good chance of success. She ordered the plaintiffs to post security for costs. On appeal, the motions judge treated the appeal as a de novo hearing. He found that impecuniosity was made out and that the master had erred by placing too high an onus on the plaintiffs when she observed that she could not say that the claim had a good chance of success. He set aside the order for security for costs. The defendant appealed.

Held, the appeal should be allowed.

The same standard of review should apply to appeals from masters and appeals from judges. There is no functional value in assigning a task to a particular judicial officer with the reservation that a different judicial officer at a higher point in the hierarchy may substitute his or her view solely by reason of his place in the hierarchy. Where the master has erred in law, the standard of review should be correctness whether the decision is final or interlocutory and whether or not it is vital to the disposition of the lawsuit. In this case, the master's finding that impecuniosity had not been made out was supportable on the evidence -- and lack of evidence -- before her, and that finding was entitled to deference. The motions judge erred in substituting his view of the evidence for that of the master. 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. The fact that the plaintiffs adduced no evidence going to the merits of the action was clearly a failure to show that the claim had a good or even a reasonable chance of success, and was also a failure to show that the claim was not devoid of merit or not bound to fail. The master's exercise of discretion to order security for costs was supportable on the evidence and based on correct principles. It ought not to be interfered with.

APPEAL from an order of Pitt J., [2007] O.J. No. 473, 40 C.P.C. (6th) 195 (S.C.J.) setting aside an order for security for costs.

Cases referred to

Equity Waste Management of Canada v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, [1997] O.J. No. 3921, 103 O.A.C. 324, 40 M.P.L.R. (2d) 107, 74 A.C.W.S. (3d) 297 (C.A.); Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991, apld Carter v. Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3d) 321, [1990] O.J. No. 2182, 77 D.L.R. (4th) 45, 41 O.A.C. 389, 30 R.F.L. (3d) 53, 24 A.C.W.S. (3d) 199 (C.A.), consd [page133] Evans v. Bartlam, [1937] A.C. 473, [1937] 2 All E.R. 646; Hudon v. Colliers Macaulay Nicolls Inc. (c.o.b. Colliers International), [2001] O.J. No. 1588, 147 O.A.C. 163, 11 C.P.C. (5th) 258, 104 A.C.W.S. (3d) 868 (Div. Ct.), not folld Other cases referred to 1286110 Ontario Ltd. v. College Manning Professional Centre Inc. (2005), 2005 79672 (ON SCDC), 78 O.R. (3d) 463, [2005] O.J. No. 4572, 208 O.A.C. 103, 143 A.C.W.S. (3d) 248 (Div. Ct.); 1485625 Ontario Inc. v. Peel Halton Kitchens Inc., 2004 11170 (ON SCDC), [2004] O.J. No. 1589, 185 O.A.C. 383, 130 A.C.W.S. (3d) 498 (Div. Ct.); Adamson v. Adamson, [1888] O.J. No. 295, 12 P.R. 469 (H.C.J.); Bank of Nova Scotia v. Liberty Mutual Insurance Co. (2003), 2003 35171 (ON SCDC), 67 O.R. (3d) 699, [2003] O.J. No. 4474, 178 O.A.C. 254, 126 A.C.W.S. (3d) 584 (Div. Ct.); Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175, [2004] O.J. No. 1, [2004] O.T.C. 1, 127 A.C.W.S. (3d) 847 (S.C.J.); Conrad v. Feldbar Construction Co. (2004), 2004 34354 (ON SC), 70 O.R. (3d) 298, [2004] O.J. No. 1290, 27 R.P.R. (4th) 153, 130 A.C.W.S. (3d) 419 (S.C.J.); Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119, [1989] O.J. No. 1399, 17 A.C.W.S. (3d) 21 (H.C.J.); John Wink Ltd. v. Sico Inc. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, [1987] O.J. No. 5, 15 C.P.C. (2d) 187, 2 A.C.W.S. (3d) 323 (H.C.J.); Jordan v. McKenzie, [1989] O.J. No. 1751, 39 C.P.C. (2d) 217, 17 A.C.W.S. (3d) 883 (C.A.), affg [1987] O.J. No. 1193, 26 C.P.C. (2d) 193, 7 A.C.W.S. (3d) 333, 18 A.C.W.S. (3d) 731 (H.C.J.); Madonia v. Mulder, [2002] O.J. No. 487, 17 C.P.C. (5th) 349, 111 A.C.W.S. (3d) 911 (S.C.J.); Marleen Investments Ltd. v. McBride (1979), 1979 1895 (ON SC), 23 O.R. (2d) 125, [1979] O.J. No. 4050, 13 C.P.C. 221, [1979] 1 A.C.W.S. 177 (H.C.J.); McBride v. Pilon, 2002 53260 (ON SCDC), [2002] O.J. No. 2803, 163 O.A.C. 101, 23 C.P.C. (5th) 288, 115 A.C.W.S. (3d) 725 (Div. Ct.); Moritex Europe Ltd. v. Oz Optics Ltd. (2006), 2006 19442 (ON SCDC), 81 O.R. 783, [2006] O.J. No. 2311, 213 O.A.C. 156, 148 A.C.W.S. (3d) 905 (Div. Ct.); Quality Steels (London) Ltd. v. Atlas Steels Ltd., [1948] O.J. No. 354, [1949] O.W.N. 110 (H.C.J.); Reid v. Dow Corning Corp., [2002] O.J. No. 3414, 48 C.P.C. (5th) 93, 134 A.C.W.S. (3d) 751 (Div. Ct.); S.P.Y. Underground Cable & Trenching Inc. v. Sims, [2004] O.J. No. 142, 181 O.A.C. 334, 128 A.C.W.S. (3d) 244 (Div. Ct.); Stoicevski v. Casement (1983), 1983 1679 (ON CA), 43 O.R. (2d) 436, [1983] O.J. No. 3186, 43 C.P.C. 178, 22 A.C.W.S. (2d) 298 (C.A.);

Statutes referred to

Construction Lien Act, R.S.O. 1990, c. C.30 Courts of Justice Act, 1984, S.O. 1984, c. 11 Judicature Act, R.S.O. 1980, c. 223

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04, 37.02(2), 56.01(1), 77, 77.04, 77.11, 77.13(6), 77.15(3) Rules of Civil Procedure, O. Reg. 560/84, rules 1.03, 37 Rules of Practice, R.R.O. 1980, Reg. 540, Rules 209, 210

Bryan D. Rumble, for plantiff/respondent. David Zuber, for defendant/applicant.

The judgment of the court was delivered by [page134]

[1] LOW J.: -- This is an appeal by The Economical Insurance Group from the order of Pitt J. dated February 12, 2007 [reported at [2007] O.J. No. 473, 40 C.P.C. (6th) 195 (S.C.J.)] setting aside the order of Case Management Master Abrams which required the respondents, the plaintiffs, to post $45,000 in security for costs.

[2] Leave to appeal was granted by Jennings J. on June 22, 2007.

[3] The central issue in this appeal is the appropriate standard of review to be applied by a judge hearing an appeal from a master.

[4] The action arises from a motor vehicle accident that took place on July 19, 1992. The plaintiff Mario Zeitoun was a passenger in a car insured by the appellant. In 1994, the plaintiffs issued and served a claim against the driver and owner of the other car involved in the accident. It is alleged that the driver of the other car was at fault. No defence was filed and default was noted but no further proceedings were taken to obtain judgment.

[5] On June 6, 2003 (11 years after the accident), the plaintiffs issued the claim in this action against Economical in reliance on the uninsured/underinsured motor vehicle coverage.

[6] The plaintiffs are ordinarily resident in Israel and have no assets in Ontario. On May 16, 2006, Economical brought a motion before the case management master for an order for security for costs. The order was granted on August 14, 2006 pursuant to rule 56.01(1)(a) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] which provides:

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, (a) the plaintiff or applicant is ordinarily resident outside Ontario.

[7] On the motion before the master, the hearing appears to have proceeded on the assumption that the appellant had a prima facie right to security arising out of the non-residency of the plaintiffs. This was not contested by the plaintiffs whose opposition to the motion was based on an assertion of impecuniosity.

[8] The master considered the evidence adduced by the plaintiffs and held that impecuniosity had not been shown.

[9] The master then turned to the merits of the case. She observed that the plaintiffs had not addressed, even tangentially, the merits of their claim in their materials. While the claim was made upon the uninsured coverage under the policy, no evidence was adduced to suggest that the at-fault driver was uninsured. [page135] The motor vehicle accident report showed an insurance company and policy number for the at-fault driver. The master held that, based on the lack of evidence addressing the merits of the case and having regard to the statutory defences raised (among them the limitation period), she could not say that the claim had a good chance of success.

[10] On appeal, the motions judge, applying Hudon v. Colliers Macaulay Nicolls Inc. (c.o.b. Colliers International), [2001] O.J. No. 1588, 147 O.A.C. 163 (Div. Ct.) and not applying Carter v. Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3d) 321, [1990] O.J. No. 2182 (C.A.), treated the appeal as a de novo hearing. Hudon is relied upon for the proposition that where a master makes an order which, while interlocutory, is nevertheless most vital to the final issue in the case, the appeal may proceed as a de novo hearing.

[11] The motions judge agreed with the observation in Chachula v. Baillie (2004), 2004 27934 (ON SC), 69 O.R. (3d) 175, [2004] O.J. No. 1 (S.C.J.) that the non-residency of the plaintiff does not create a prima facie right to an order for security for costs. The motions judge also held that the master had erred by placing too high an onus on the plaintiffs as to the merits when she observed that she could not say that the claim has a good chance of success.

[12] The master had found that impecuniosity had not been shown on the evidence. In her view, the evidence raised more questions than it answered. On appeal, the motions judge substituted his view of the evidence. Although he observed, at para. 41 of the reasons, that the presentation of Mr. Zeitouns' income and expenses left much to be desired, he concluded, at para. 43, "I do not believe that Mr. Zeitoun's financial disclosure, in light of the unchallenged depositions, was so deficient as to warrant, in these special circumstances, a denial of the claim to impecuniosity."

[13] On the assumption that there was no prima facie right to security, the result of the appeal turned on the substitution of the motions judge's view of the evidence of impecuniosity.

[14] Leave to appeal was granted on grounds of the existence of conflicting lines of cases as to the standard of review on appeal from a master's interlocutory order going to a matter vital to the final issue of the case. The appellant's position is that the motions judge erred in law in declining to apply the standard of review in Carter v. Brooks, supra, and by applying instead the dicta in Hudon to hear the matter de novo.

[15] The fundamental conflict in the competing lines of authority lies in whether, on appeal, deference is to be accorded to the master's findings of fact and exercise of discretion. Under Hudon, the appellate court may substitute its own views of the evidence [page136] and exercise the discretion anew; under Carter, the appeal proceeds as a true appeal and deference is accorded to the court below as to findings of fact.

[16] Carter was an appeal from an order arising out of a custody and mobility application. The order of the judge of first instance was therefore made on a paper record. The Court of Appeal dealt with the standard of review and the issue was whether and to what extent the standard should differ depending on whether the decision appealed from had been made after hearing viva voce evidence as opposed to affidavit materials.

[17] At para. 34, Morden A.C.J.O. stated:

. . . I should say something about the standard of appellate review. Since this is not a case where the judge of first instance heard oral evidence, with the advantage that this would have given him over this court in his assessment of the evidence and his findings of fact, the appellant to succeed in the realm of fact does not have the burden of establishing palpable and overriding error. An appeal, however, is not a rehearing which takes place as though there were not already a decision on the merits of the case. The judge's decision is entitled to due respect and, I think, should not be set aside unless the appellant can show the court that the judge erred in his appreciation of the evidence, in the inferences he drew from the evidence, or in his application of the relevant legal considerations.

[18] The competing view, reflected in Hudon, is descended from the seminal modern case Marleen Investments Ltd. v. McBride (1979), 1979 1895 (ON SC), 23 O.R. (2d) 125, [1979] O.J. No. 4050 (H.C.J.). The master's order under appeal in Marleen was a dismissal of a motion to dismiss an action for want of prosecution. There were conflicting lines of authorities as to the function of the judge on appeal from an order of the master, with one line of authority holding that a judge on appeal was unfettered by the exercise of the master's discretion (e.g., Quality Steels (London) Ltd. v. Atlas Steels Ltd., [1948] O.J. No. 354, [1949] O.W.N. 110 (H.C.J.)). Southey J. rejected that approach in favour of that in Adamson v. Adamson, [1888] O.J. No. 295, 12 P.R. 469 (H.C.J.), at p. 471 P.R., where Chancellor Boyd accepted as settled that "[t]he rule is not to interfere unless the order appealed from is clearly wrong". Southey J. wrote [at para. 6]:

I cannot accept that the House of Lords in Evans v. Bartlam, supra, intended to lay down a rule of practice that all appeals from decisions of Masters involving the exercise of discretion should proceed as though the issues were being heard for the first time, that is, by way of a rehearing rather than an appeal. Any such rule of practice, in my view, would substantially reduce the advantages in our system of having Masters to deal with many matters of procedure. I find support for my view in the speech of Lord Wright in Evans v. Bartlam, in which he said the following at p. 484: [page137]

The Masters admirably exercise their discretion in routine matters of pleading, discovery, interrogatories, venue, mode of trial, and other interlocutory directions, without any appeal being necessary. But such matters may on occasion raise questions most vital to the final issue of the case. The decision of such questions is properly for the judge who will no doubt consider carefully the order of the Master. If a further appeal is taken to the Court of Appeal it is the judge's discretion which that Court has either to support or vary or reverse.

[19] Hudon itself was an appeal from a final order of a case management master wherein the master had dismissed a motion to set aside the registrar's dismissal of the action for failure to set the action down for trial within the time stipulated in the Simplified Rules. The Divisional Court espoused (but did not, in my view, apply) Marleen and it confirmed [at para. 7] the statement in Stoicevski v. Casement (1983), 1983 1679 (ON CA), 43 O.R. (2d) 436, [1983] O.J. No. 3186 (C.A.) that "some interlocutory rulings which raise questions vital to the final issue of the case require a rehearing in which the judge's discretion may properly be substituted for that of the master or local judge".

[20] The actual decision in Hudon appears to be grounded in the finding that the master had erred in law by imposing a standard more rigorous on the motion to set aside the registrar's administrative dismissal than would have applied had the dismissal been granted on grounds of want of prosecution. Accordingly, the result was driven not primarily by substitution of the appellate court's exercise of discretion in the place of the master's, but rather by the master's error of law or principle. Nevertheless, the decision, coming as it did from this court, has been relied upon in subsequent cases as standing for the proposition that where a master makes a discretionary order that is final or is vital to the final issue of the case, the appellate court may hear the matter de novo (see Madonia v. Mulder, [2002] O.J. No. 487, 17 C.P.C. (5th) 349 (S.C.J.); Reid v. Dow Corning Corp., [2002] O.J. No. 3414, 48 C.P.C. (5th) 93 (Div. Ct.); McBride v. Pilon, 2002 53260 (ON SCDC), [2002] O.J. 2803, 163 O.A.C. 101 (Div. Ct.); S.P.Y. Underground Cable & Trenching Inc. v. Sims, 2004 9450 (ON SCDC), [2004] O.J. No. 142, 181 O.A.C. 334 (Div. Ct.); and 1286110 Ontario Ltd. v. College Manning Professional Centre Inc. (2005), 2005 79672 (ON SCDC), 78 O.R. (3d) 463, [2005] O.J. No. 4572 (Div. Ct.)).

[21] In the meantime, in Bank of Nova Scotia v. Liberty Mutual Insurance Co. (2003), 2003 35171 (ON SCDC), 67 O.R. (3d) 699, [2003] O.J. No. 4474 (Div. Ct.), the Divisional Court stated a new test, an amalgam of the Marleen Investments and the Hudon approaches. At paras. 11-14, the court held that unless the master's decision is vital to the ultimate disposition of the case; (a) if the matter is one of discretion, the court should not interfere unless the decision was [page138] clearly wrong; (b) if the matter is one of law not vital to the disposition of the action, the court should not interfere unless the decision was clearly wrong; and (c) if the matter is one of law that is deemed vital to the disposition of the action, the test should be one of correctness. The court did not disturb, however, the "former standards of review" in situations where the order appealed from is determined to be vital to the ultimate disposition of the case.

[22] As was recognized by the motions judge in the case at bar, the jurisprudence is conflicting as to the appropriate standard of review. Further, the cases do not appear to be reconcilable.

[23] In Moritex Europe Ltd. v. Oz Optics Ltd. (2006), 2006 19442 (ON SCDC), 81 O.R. (3d) 783, [2006] O.J. No. 2311, 213 O.A.C. 156 (Div. Ct.), Epstein J. undertook a comprehensive review and analysis of the conflicting streams of cases, concluding that at least in terms of numbers, the weight of authority seemed to favour the approach in Hudon. She observed, however, that it would be useful if a higher court were to resolve the issue.

[24] While Carter v. Brooks is arguably distinguishable in that it deals with a different dichotomy (that between decisions upon oral evidence as opposed to those upon affidavit evidence) and in that it does not concern an appeal from the master, the principle it lays down is amenable to being applied equally to appeals from masters as to appeals from judges.

[25] As Then J. observed in 1485625 Ontario Inc. v. Peel Halton Kitchens Inc., 2004 11170 (ON SCDC), [2004] O.J. No. 1589, 185 O.A.C. 383 (Div. Ct.), at para. 7:

The distinction between the standard of review for the decision of a Master compared to a decision of a judge has been based upon the assumption that Masters rarely hear oral evidence. This distinction becomes hard to justify when one considers that the decisions of judges are entitled to a high level of deference even when a judge has heard no oral evidence. If the discretionary or interlocutory orders of Masters are generally reviewed according to the same standard as the discretionary orders of judges there seems to be little reason to treat final orders of Masters differently on the basis of their not having heard oral evidence. There is even less reason to impose a different standard of review in cases where the Master did hear oral evidence.

[26] In my view, there is no justification in principle why the standard of review applied on appeals from judges ought not to be applied equally to appeals from masters. That appeals from masters have been permitted to be treated as a de novo hearing in some circumstances appears to have been driven to large degree by historical notions of hierarchy and prerogative that now warrant re-examination in light of (a) the evolution and [page139] rationalization of standards of review in Canadian jurisprudence, (b) the expansion of the role of the master within Ontario's civil justice system, (c) the values of economy and expediency expressed in the general principles underlying the Rules of Civil Procedure (see rule 1.04) and (d) the difficulty and contentiousness in deciding in each case whether the interlocutory order appealed from is one which is vital to the final issue in the case.

[27] In Evans v. Bartlam, [1937] A.C. 473, [1937] 2 All E.R. 646, the decision relied on in Marleen as authority that a judge hearing an appeal from a master may proceed de novo, the master's order appealed from was final. The master had refused to set aside a default judgment. In my view, Lord Wright's statement was conclusory when he wrote, "the decision of such questions is properly for the judge . . .". Whatever may have been the interrelationship between the jurisdictions of the master and judge under the rules in effect in the United Kingdom in 1937, there is, in my view, good reason to doubt the correctness and applicability of that conclusion in the context of the Rules of Civil Procedure in 2008 and the role of the master thereunder.

[28] Both Marleen and Stoicevski v. Casement, supra, were decided under the Rules of Practice, R.R.O. 1980, Reg. 540 made under the Judicature Act, R.S.O. 1980, c. 223.

[29] Under the Rules of Practice [Rules 209, 210], the jurisdiction of the master was comparatively limited compared with the ambit of the jurisdiction today. Although "County court" was a defined term, "court" was not a defined term. The master's jurisdiction to hear references was similar to that under the Rules of Civil Procedure, but the jurisdiction to hear motions was more circumscribed and consisted of a subset of the motions listed in Rule 209 that were not required to be heard in open court.

[30] When the Rules of Civil Procedure, O. Reg. 560/84 came into force in 1985 with the Courts of Justice Act, 1984, S.O. 1984, c. 11, it marked a significant expansion of the role of the master and a change of culture. The "court" was defined at rule 1.03 as including a master having jurisdiction to hear motions under Rule 37 and more latterly, including a case management master. Accordingly, wherever there is a reference to "the court" in the rules, what is meant is either a judge or a master. Whereas the presumption under the Rules of Practice was that the master had no jurisdiction to deal with motions unless specifically granted under the operation of Rules 209 and 210 together, the presumption under the Rules of Civil Procedure is that the master does [page140] have jurisdiction unless there is a specific statute or rule to the contrary. Rule 37.02(2) provides:

37.02(2) A master has jurisdiction to hear any motion in a proceeding, and has all the jurisdiction of a judge in respect of a motion, except a motion, (a) where the power to grant the relief sought is conferred expressly on a judge by a statute or rule; (b) to set aside, vary or amend an order of a judge; (c) to abridge or extend a time prescribed by an order that a master could not have made; (d) for judgment on consent in favour of or against a party under disability; (e) relating to the liberty of the subject; (f) under section 4 or 5 of the Judicial Review Procedure Act; or (g) in an appeal.

[31] A further expansion of the jurisdiction of the master came in 1996 with the introduction of case management and Rule 77. Under the case management regime, the case management master has the additional new powers and duties set out in rules 77.04, 77.11, 77.13(6) and 77.15(3). The additional powers conferred on case management masters (and judges) reflected yet another paradigm change, a shift of management and control from the bar to the court and it was primarily to the case management master that the bulk of the management functions fell.

[32] In short, the role and the jurisdiction of the master in the administration of civil justice have evolved significantly from that in existence in 1979 and 1983 when Marleen and Stoicevski were respectively decided.

[33] Even in the absence of expansion, the powers and duties assigned to the master clearly contemplate that decisions will be made that require both the exercise of discretion and findings of fact that have the effect of rendering a final decision on the merits, primarily on affidavits but also at times on viva voce evidence. For example, the master conducts trials in actions brought under the Construction Lien Act, R.S.O. 1990, c. C.30. The master also conducts mortgage references. The standard of review on a contested confirmation of a report from a reference is that on a true appeal and not on the basis of a hearing de novo (see Jordan v. McKenzie, [1987] O.J. No. 1193, 26 C.P.C. (2d) 193 (H.C.J.), affd [1989] O.J. No. 1751, 39 C.P.C. (2d) 217 (C.A.) and Conrad v. Feldbar Construction Co. (2004), 2004 34354 (ON SC), 70 O.R. (3d) 298, [2004] O.J. No. 1290 (S.C.J.)). As Anderson J. stated on the motion to oppose confirmation of the master's report in Jordan, [page141]

As I have already intimated, there is paucity of authority dealing with the approach to be taken by the judge on a motion such as those which are before me. The position seems to be most closely analogous to that of a judge under the former practice hearing an appeal from a reference, and, as I have indicated, it was on the basis of an appeal that the motion and cross-motion were argued before me. Unless the rules normally governing appeals are to be completely abandoned, and the entire reference made a farce, I ought not to re-try the matter which was tried by the Master. In fairness, it was not suggested in argument that I should do so, although the acceptance of the submissions for either the plaintiff or the defendant would have brought me very close to that process. I think I ought not to interfere with the result unless there has been some error in principle demonstrated by the Master's reasons, some absence or excess of jurisdiction, or some patent misapprehension of the evidence.

[34] There is probably no function more analogous to that of a judge at trial than that of a master conducting a trial on a reference on viva voce evidence. The report, once confirmed, has the force and effect of a judgment, and yet the standard of review on opposition to confirmation, as stated in Jordan, is expressed in language substantially the same as that in Carter v. Brooks. Accordingly, the jurisprudence holding that an interlocutory order of the master deemed "most vital to the final issue in the case" should attract a higher level of intervention by way of a de novo hearing appears unjustifiably anomalous.

[35] The larger issue that is engaged is the efficient and rational use of judicial resources in the appeal process. As Laskin J.A. wrote in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, [1997] O.J. No. 3921 (C.A.) [at pp. 335-36 O.R.]:

The judgment of Morden A.C.J.O. [in Carter v. Brooks] recognizes that review of a trial or motion judge's findings of fact on a standard of correctness is inappropriate, even though the judge heard no oral evidence. An appellate court is not justified in intervening merely because it takes a different view of the evidence. Admittedly, the traditional rationale for deference to a trial judge's findings of fact -- the trier's advantage of seeing and hearing the witnesses -- does not apply when all of the evidence is written; but other policy considerations support a deferential standard of review on appeal. La Forest J. discussed some of these considerations in Schwartz v. Canada, 1996 217 (SCC), [1996] 1 S.C.R. 254 at pp. 278-79, 133 D.L.R. (4th) 289:

Others have also pointed out additional judicial policy concerns to justify the rule. Unlimited intervention by appellate courts would greatly increase the number and the length of appeals generally. Substantial resources are allocated to trial courts to go through the process of assessing facts. The autonomy and integrity of the trial process must be preserved by exercising deference towards the trial courts' findings of fact; see R.D. Gibbens, "Appellate Review of Findings of Fact" (1992), 13 Adv. Q. 445, at pp. 445-48; [page142] Fletcher v. Manitoba Public Insurance Co., 1990 59 (SCC), [1990] 3 S.C.R. 191, at p. 204. This explains why the rule applies not only when the credibility of witnesses is at issue, although in such a case it may be more strictly applied, but also to all conclusions of fact made by the trial judge [citation omitted].

La Forest J.'s reasons make evident that deference is called for even when findings of fact are not grounded on findings of credibility. Similarly, in Goodman Estate v. Geffen, 1991 69 (SCC), [1991] 2 S.C.R. 353 at pp. 388-89, 81 D.L.R. (4th) 211 at p. 236, Wilson J. observed:

Even where a finding of fact is not contingent upon credibility, this court has maintained a non- interventionist approach to the review of trial court findings. . . .

And even in those cases where a finding of fact is neither inextricably linked to the credibility of the testifying witness nor based on a misapprehension of the evidence, the rule remains that appellate review should be limited to those instances where a manifest error has been made.

In his book, Standards of Review Employed by Appellate Courts (Edmonton: Juriliber, 1994), the Honourable Roger Kerans offers a different but also valid justification for limited appellate review, which he calls "the presumption of fitness", at p. 28:

The governing principle for limiting review should be that the sole purpose of a standard of limited review is to avoid duplication of effort by judicial actors on issues if no commensurate improvement in the quality of justice occurs.

Appeal courts limit review because they have confidence in the capacity of first judges to do justice, and see no need to repeat that process. This leads to the presumption of fitness.

Therefore, although the entire record before a trial judge or a motion judge consists of documentary or written evidence, as it does in this case, the judge's factual findings are entitled to deference on appeal. What standard of deference applies in such a case? It is not easy to articulate a standard less deferential than "manifest error" but falling short of "correctness". I suggest that it may simply be a matter of weight or emphasis, or that, plausibly, a uniform standard of appellate review should be applied to a trial judge's findings of fact, whether the evidence is entirely oral, entirely documentary or, more typically, a combination of the two.

What is important for this appeal is the kind of error that justifies intervention by an appellate court. An error of law obviously justifies intervention. An appellate court may interfere with a finding of fact if the trial judge or motion judge disregarded, misapprehended, or failed to appreciate relevant evidence, made a finding not reasonably supported by the evidence, or drew an unreasonable inference from the evidence.

[36] In my view, the court should, as a rule, proceed on the presumption of fitness on the part of judicial officers, judges and masters alike, to perform the mandates assigned to them. There is no functional value in assigning a task to a particular [page143] judicial officer with the reservation that a different judicial officer at a higher point in the hierarchy may substitute his or her view solely by reason of his place in the hierarchy and without some demonstrated deviation in the original decision from the applicable legal principles or some misapprehension of the facts and the evidence that affects the soundness of the result. In this, it is my view that Lord Wright's statement in Evans v. Bartlam should be laid aside, as it appears to be grounded in an adherence to hierarchical prerogative that is no longer relevant.

[37] The development of the jurisprudence as to standards of review of decisions of judges and of inferior tribunals has also advanced significantly since Stoicevski and, a fortiori, since Marleen was decided.

[38] In Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, the Supreme Court adopted the presumption of fitness and definitively described the role of the appellate court. Iacobucci and Major JJ. stated at paras. 3-6 of the majority decision:

The role of the appellate court was aptly defined in Underwood v. Ocean City Realty Ltd. (1987), 1987 2733 (BC CA), 12 B.C.L.R. (2d) 199 (C.A.), at p. 204, where it was stated:

The appellate court must not retry a case and must not substitute its views for the views of the trial judge according to what the appellate court thinks the evidence establishes on its view of the balance of probabilities.

While the theory has acceptance, consistency in its application is missing. The foundation of the principle is as sound today as 100 years ago. It is premised on the notion that finality is an important aim of litigation. There is no suggestion that appellate court judges are somehow smarter and thus capable of reaching a better result. Their role is not to write better judgments but to review the reasons in light of the arguments of the parties and the relevant evidence, and then to uphold the decision unless a palpable error leading to a wrong result has been made by the trial judge.

What is palpable error? The New Oxford Dictionary of English (1998) defines "palpable" as "clear to the mind or plain to see" (p. 1337). The Cambridge International Dictionary of English (1996) describes it as "so obvious that it can easily be seen or known" (p. 1020). The Random House Dictionary of the English Language (2nd ed. 1987) defines it as "readily or plainly seen" (p. 1399).

The common element in each of these definitions is that palpable is plainly seen. Applying that to this appeal, in order for the Saskatchewan Court of Appeal to reverse the trial judge the "palpable and overriding" error of fact found by Cameron J.A. must be plainly seen. As we will discuss, we do not think that test has been met. [page144]

[39] At paras. 10-20 of the decision there is a consideration of the standard of review applicable to findings of fact and to factual inferences that is of particular relevance to the appeal before the court [at paras. 10-12]:

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": Stein v. The Ship "Kathy K", 1975 146 (SCC), [1976] 2 S.C.R. 802, at p. 808; Ingles v. Tutkaluk Construction Ltd., [1999] 1 S.C.R. 298, 2000 SCC 12, at para. 42; Ryan v. Victoria (City), 1999 706 (SCC), [1999] 1 S.C.R. 201, at para. 57. While this standard is often cited, the principles underlying this high degree of deference rarely receive mention. We find it useful, for the purposes of this appeal, to review briefly the various policy reasons for employing a high level of appellate deference to findings of fact.

A fundamental reason for general deference to the trial judge is the presumption of fitness -- a presumption that trial judges are just as competent as appellate judges to ensure that disputes are resolved justly. Kerans, supra, at pp. 10-11, states that:

If we have confidence in these systems for the resolution of disputes, we should assume that those decisions are just. The appeal process is part of the decisional process, then, only because we recognize that, despite all effort, errors occur. An appeal should be the exception rather than the rule, as indeed it is in Canada.

With respect to findings of fact in particular, in Gottardo Properties, supra, Laskin J.A. summarized the purposes underlying a deferential stance as follows (at para. 48):

Deference is desirable for several reasons: to limit the number and length of appeals, to promote the autonomy and integrity of the trial or motion court proceedings on which substantial resources have been expended, to preserve the confidence of litigants in those proceedings, to recognize the competence of the trial judge or motion judge and to reduce needless duplication of judicial effort with no corresponding improvement in the quality of justice.

[40] The appellant argues that the appropriate standard of review of a master's order, whether it be final or interlocutory, should be in accordance with that expressed by the Supreme Court in Housen v. Nikolaisen, supra, and by the Court of Appeal in Equity Waste Management such that the decision will be interfered with only if the master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error.

[41] I would agree with that submission. There is, in my view, no compelling reason for adopting differing standards of review on appeal depending solely on the place in the judicial hierarchy occupied by the decision maker whose decision is under appeal. Such an approach is anachronistic and irreconcilable with the [page145] presumption of fitness. Rather, similar kinds of decisions and similar kinds of errors ought to be treated similarly, and for that reason, I would hold that where the master has erred in law, the standard of review should be correctness whether the decision be final or interlocutory and whether or not it is vital to the disposition of the lawsuit. The danger in doing otherwise is the potential for the development of straying lines of authority with resulting confusion.

[42] On the basis that the approach in Housen v. Nikolaisen is the appropriate one, I turn now to a consideration of the merits of the appeal.

[43] Significantly, the motions judge did not make a finding that the master had made a palpable and overriding error or that she had exercised her discretion upon wrong principles, misapprehended the facts, disregarded, misapprehended or failed to appreciate relevant evidence, made a finding not reasonably supported by the evidence, or that she had drawn an unreasonable inference from the evidence. It may be that the motions judge did not turn his mind to these issues as he had determined to proceed with a hearing de novo. In doing so, he erred in law.

[44] I would concur that rule 56.01 does not create a prima facie right to security for costs but rather triggers the inquiry. That being said, I am of the view that if the master erred in this, the error caused no injustice because in the absence of any evidence showing the merits of the case and in light of the finding that impecuniosity had not been shown, there are no factors that would militate against an order for security, whereas there are sound arguments in favour.

[45] Provided that the plaintiff is able to show that the claim is not clearly devoid of merit, impecuniosity may be a persuasive factor in tipping the scales in favour of no order for security. Where a plaintiff seeks to rely on impecuniosity, however, the onus falls on him to show it. As Doherty J. stated in Hallum v. Canadian Memorial Chiropractic College (1989), 1989 4354 (ON SC), 70 O.R. (2d) 119, [1989] O.J. No. 1399 (H.C.J.), at para. 18:

A litigant who falls within one of the categories created by rule 56.01(a) to (f), and who relies on his impecuniosity to avoid an order requiring that he post security, must do more than adduce some evidence of impecuniosity. The onus rests on him to satisfy the court that he is impecunious: City Paving Co. v. Port Colborne (City) (1985), 3 C.P.C. (2d) 316 (Ont. Master's Ch.). The onus rests on the party relying on impecuniosity, not by virtue of the language of rule 56.01, but because his financial capabilities are within his knowledge and are not known to his opponent; and because he asserts his impecuniosity as a shield against an order as to security for costs. [page146]

[46] The test then is "has the plaintiff demonstrated impecuniosity on a balance of probabilities"? The motions judge, however, appears not to have applied that test in deciding the appeal but rather the inverse of it, a test wherein the question is posed whether there is a good reason to warrant denying the plaintiff's claim that he is impecunious. In doing so, he erred in law.

[47] In my view, the master's finding that impecuniosity had not been shown was supportable on the evidence -- and lack of evidence -- before her and, applying the deferential standard in Housen and Equity Waste Management, I would not interfere with it.

[48] The motions judge held that the master had erred in imposing too high an onus on the plaintiff in relation to the merits of the action. I am, with respect, unable to concur. There is a difference in the quality of the evidence required depending on whether or not the plaintiff is able to show impecuniosity.

[49] Where impecuniosity is shown, the plaintiff needs only to demonstrate that the claim is not plainly devoid of merit. (See John Wink Ltd. v. Sico Inc. (1987), 1987 4299 (ON SC), 57 O.R. (2d) 705, [1987] O.J. No. 5 (H.C.J.).) That is a very low evidentiary threshold.

[50] 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.

[51] The fact that the plaintiffs adduced no evidence going to the merits of the action is clearly a failure to show that the claim has a good or even a reasonable chance of success and is, in my view, also a failure to show that the claim is not devoid of merit or not bound to fail. The crux of the case is whether or not the at-fault driver was insured. In the absence of evidence that he was uninsured, there is no viable action. Even if the merits of the case were approached on the basis of the pleadings alone, the limitation period appears to be a complete defence as it is not addressed in a Reply setting out material facts which, if proved, could possibly toll the limitation period.

[52] The master's exercise of discretion to order security for costs on the material before her was therefore supportable on the evidence and based on correct principles. Employing a standard of deference, it ought not to be interfered with. [page147]

[53] The appeal is allowed. The order of the motions judge is set aside, and the Master's order is restored.

[54] If the parties are not able to agree on costs, written submissions, with a costs outline, totaling no more than five pages may be filed with the Registrar by the appellant within ten days and by the respondent within ten days thereafter.

Appeal allowed.