ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 05-CV-285434CM2
COURT FILE NO .: 05-CV-300149PD2
DATE: 20120416
B E T W E E N:
BRUNO APPLIANCE AND FURNITURE, INC. Plaintiff/Appellants - and - CASSELS BROCK & BLACKWELL LLP, GREGORY JACK PEEBLES and ROBERT HRYNIAK Defendants/Respondents
FRED MAULDIN, DAN MYERS, ROBERT BLOMBERG, THEODORE LANDKAMMER, LLOYD CHELLI, STEPHEN YEE, MARVIN CLEAIR, CAROLYN CLEAIR, RICHARD HANNA, DOUGLAS LAIRD, CHARLES IVANS, LYN WHITE and ATHENA SMITH Plaintiffs/Appellants
and
CASSELS BROCK & BLACKWELL LLP, GREGORY JACK PEEBLES and ROBERT HRYNIAK Defendants (Respondents)
David Alderson, Javad Heydary and Natasha Oniszczak for the Plaintiffs/Appellants
Luisa Ritacca and Paul J. Saguil for the Defendants/Respondents, Cassels Brock & Blackwell LLP
Jonathan Rosenstein and Jessica DiFederico for the Defendant/Respondent, Gregory Jack Peebles
Sarit Batner and Moya Graham for the Defendant/Respondent Robert Hryniak
HEARD: April 2, 2012
S. LEDERMAN J.
REASONS FOR DECISION
[ 1 ] The plaintiffs appeal from the Order of Master Glustein, case management master for these proceedings, imposing security for costs against the plaintiffs.
[ 2 ] Appellate interference will be warranted “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.” (See Zeitoun v. Economical Insurance Group (2008), 91 O.R. (3d) 131 (Div. Ct.), aff’d 2009 ONCA 415 at para. 40 (Div. Ct.)). Here the Master was exercising case management functions. Increased deference ought to be shown to case management masters because of their unique role in the civil litigation process (Zeitoun, supra at para. 31).
Background Facts
[ 3 ] The Bruno action was commenced in March 2005 and the Mauldin action was commenced in November 2005.
[ 4 ] Master Glustein has been case managing these actions, essentially from the beginning, and is familiar with the complicated factual and procedural aspects of the cases.
[ 5 ] In October 2007, Master Glustein found that the Bruno and the Mauldin plaintiffs were non-residents without any assets in Ontario and were not impecunious. The plaintiffs were required to post security for costs in these actions. The plaintiffs posted the security for costs as required.
[ 6 ] The plaintiffs brought motions for summary judgment in both the Bruno action and the Mauldin action. On October 22, 2010, Grace J. dismissed the summary judgment motions against the defendants, Cassels Brock & Blackwell LLP (“Cassels”) and Gregory Jack Peebles (“Peebles”) but granted summary judgment against the defendant Robert Hryniak (“Hryniak”).
[ 7 ] Hryniak appealed the decision of Grace J. The Court of Appeal granted Hryniak’s appeal in the Bruno action, but dismissed Hryniak’s appeal in the Mauldin action.
[ 8 ] Prior to the release of the Court of Appeal decision, Cassels and Peebles brought motions before Master Glustein seeking orders that the plaintiffs post additional security for costs.
[ 9 ] As the plaintiffs were not Ontario residents, Master Glustein found that defendants had met their initial onus under Rule 56.01(1) (a) of the Rules of Civil Procedure , R.R.O. 1990, reg. 194. Plaintiffs’ counsel advised at the hearing before Master Glustein that he was not taking the position that the plaintiffs were impecunious. Rather, plaintiffs’ counsel submitted that the merits of the claims against Cassels and Peebles were so “overwhelming” that security for costs should not be ordered even though the plaintiffs were not impecunious. It was further argued that if security for costs was appropriate, the Master should reserve his decision on the motion until the appeal decision because security for costs should be ordered against Hryniak and not against the plaintiffs if Hryniak is unsuccessful on the appeal.
[ 10 ] With respect to the plaintiffs’ argument that there was an overwhelmingly likelihood of success against Cassels and Peebles, Master Glustein concluded as follows at para.6:
In light of Justice Grace’s conclusion that there is a genuine issue requiring trial, I cannot find that there is an “overwhelming” likelihood of success on the plaintiffs’ claims against Cassels and Peebles. While the plaintiffs sought to establish the strength of their claims based on the factual findings of Justice Grace, a conclusion that a case is “overwhelmingly” likely to succeed requires that both the factual basis and liability be “overwhelmingly” demonstrated. Justice Grace found on the evidence that there was a genuine issue requiring trial with respect to the claims against Cassels and Peebles, and I adopt his analysis and conclude that the plaintiffs have not established an overwhelming case against the moving party defendants.
[ 11 ] The Master stated at para.7 that he also relied on his earlier reasons in which he reviewed much of the evidence filed again on this motion.
[ 12 ] With respect to the plaintiffs’ argument that if security for costs were to be ordered, Hryniak should be directed to post the additional security on behalf of the plaintiffs, Master Glustein declined to determine whether at law he had jurisdiction to make such an order. Instead, he considered whether making such an order would be a just exercise of discretion under rule 56.01 in the circumstances. He found that such an order against Hryniak would not be just regardless of the result of his appeals from the summary judgments. He concluded that in either case, Cassels and Peebles are entitled to security for costs from the non-resident plaintiffs to protect their costs exposure at trial and not be exposed to any risk that the plaintiffs may not be able to collect on their judgments against Hryniak.
The Test for Awarding Security for Costs
[ 13 ] Under rule 56.01, courts are to take a two-step inquiry in determining whether or not an order for security for costs is appropriate. In Hallum v. Canadian Memorial Chiropractor College (1989), [1989] CarswellOnt 896 (S.C.J.) at para. 10, Doherty J. (as he then was) stated as follows:
Rule 56.01 which empowers a court to order security for costs establishes a two step inquiry. First, the defendant must show that it “appears” that one of the six factors set out in cls. (a) through (f) of rule 56.01 exists. Secondly, if the defendant can clear the first hurdle, the court may make any order as to security for costs “as is just”. I take this second stage to require an inquiry into all factors which may assist in determining the justice of the case. I also take the discretion created by this second stage as permitting orders which range from an order requiring full security for costs in a lump sum payment to an order which provides that no security for costs need be posted.
[ 14 ] Cassels and Peebles satisfied the first part of the test in that they have shown that the plaintiffs are ordinarily resident outside Ontario as set out in rule 56.01(a).
[ 15 ] In considering the justice of the case, Master Glustein then proceeded to consider the merits of the action. He focused on the plaintiffs’ submission that the case against Cassels and Peebles had an “overwhelming” likelihood of success. The Master found that was not so in light of Grace J.’s dismissal of the summary judgment motions as against Cassels and Peebles.
[ 16 ] The plaintiffs had mistakenly pegged the standard too high in their argument. It is not necessary that the plaintiffs show that their case has an overwhelming likelihood of success. Rather, they have to demonstrate that they have “a good chance of success”. In Zeitoun, supra, Low J. for the Divisional Court stated as follows at paras 48-50:
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.
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), 57 O.R. (2d) 705 (H.C.J.)) That is a very low evidentiary 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. (Emphasis added)
[ 17 ] Further, Code J. in Cigar 500.com Inc. v. Ashton Distributors Inc. et al., 2009 46451 (Ont. S.C.J.) in following Zeitoun, supra stated at para. 69 that the test is “a good chance of success”.
[ 18 ] Accordingly, in considering this factor, Master Glustein focused on the wrong test as a result of counsel’s submissions and assessed the merits against a benchmark that was too high. Having done so, it is not surprising that he found that the conclusion by Grace J. that there is a genuine issue requiring a trial means that the plaintiffs cannot claim that there is an overwhelming likelihood that they will succeed. As the test is “good chance of success”, there was an obligation on the part of the Master to closely examine the facts in light of the findings of Grace J. and the Court of Appeal to determine whether the landscape had changed since his observations in his initial decision awarding security for costs in 2007.
[ 19 ] In reviewing the merits on the higher standard of “overwhelming likelihood of success”, the Master has made an error in law which unfortunately arose from counsel’s submissions. Nevertheless, the appeal must be allowed on this basis and the matter remitted to the case management master to scrutinize the evidence and findings to determine whether the plaintiffs have a good chance of success as against Cassels and Peebles as being a factor in considering whether it is just that security for costs not be awarded in their favour as against the plaintiffs.
[ 20 ] As to the plaintiffs’ position that if security for costs is to be awarded then Hryniak should bear all or partial responsibility therefor, there appears to be no jurisdiction under rule 56.01 to allow a court to order security for costs of one defendant from another defendant as it is only against a plaintiff or applicant that defendants may seek security for costs. Accordingly, there is no merit to the plaintiffs’ position on this point. Furthermore, even if there was such jurisdiction, it cannot be said that the Master was clearly wrong in deciding in his discretion that security for costs should not be awarded as against Hryniak regardless of the outcome of his appeals.
[ 21 ] The plaintiffs on this appeal conceded that the quantum of security of security for costs as awarded by the Master was reasonable and do not take issue with amounts awarded.
Conclusion
[ 22 ] The appeal is therefore allowed in part and the matter is remitted to the case management master to address the factor of the merits of the plaintiffs’ claim using the standard of “a good chance of success” and exercise his discretion accordingly.
[ 23 ] As the plaintiffs have been substantially successful on this appeal, they will have their costs against Cassels and Peebles fixed in the total amount of $6,000. all-inclusive. Hryniak will have his costs from the plaintiffs fixed at $2,500. all-inclusive.
S. Lederman J.
Released: 20120416
COURT FILE NO.: 05-CV-285434CM2
COURT FILE NO.: 05-CV-300149PD2
DATE: 20120416
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
BRUNO APPLIANCE AND FURNITURE, INC. Plaintiff/Appellants - and - CASSELS BROCK & BLACKWELL LLP, GREGORY JACK PEEBLES and ROBERT HRYNIAK Defendants/Respondents
FRED MAULDIN, DAN MYERS, ROBERT BLOMBERG, THEODORE LANDKAMMER, LLOYD CHELLI, STEPHEN YEE, MARVIN CLEAIR, CAROLYN CLEAIR, RICHARD HANNA, DOUGLAS LAIRD, CHARLES IVANS, LYN WHITE and ATHENA SMITH Plaintiffs/Appellants
and
CASSELS BROCK & BLACKWELL LLP, GREGORY JACK PEEBLES and ROBERT HRYNIAK Defendants (Respondents)
REASONS FOR DECISION
S. Lederman J.
Released: 20120416