SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: 05-CV-285434PD2
05-CV-300149PD2

Date: 20120727

Re: Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP et al.
Mauldin et al. v. Cassels Brock & Blackwell LLP et al.

Before: Master Glustein

Counsel:
Javad Heydary and David Alderson for the plaintiffs

Luisa Ritacca for the defendant Cassels Brock & Blackwell LLP

Jonathan Rosenstein for the defendant Gregory Jack Peebles

Heard: July 6, 2012

REASONS FOR DECISION

Background to the re-hearing

[ 1 ] By reasons dated October 25, 2007 [1] (the “First Reasons”), I ordered the plaintiff Bruno Appliance and Furniture Inc. (“Bruno”) in Court File No. 05-CV-285434PD2 (the “Bruno Action”) and the plaintiffs Fred Mauldin et al. (the “Mauldin Group”) in Court File No. 05-CV-300149PD2 (the “Mauldin Action”) to post security for costs to the defendants Cassels Brock & Blackwell LLP (“Cassels”), Gregory Jack Peebles (“Peebles”), and Robert Hryniak (“Hryniak”) for pleadings and for costs related to the plaintiffs’ then upcoming summary judgment motions against those defendants.

[ 2 ] By decision dated October 22, 2010 (cited as 2010 ONSC 5490), Justice Grace dismissed the plaintiffs’ summary judgment motions against Peebles and Cassels in both actions, but granted summary judgment against Hryniak in both actions (the “Grace Decision”). Hryniak appealed the Grace Decision in both actions to the Court of Appeal. Those appeals were heard collectively with other summary judgment appeals on June 21-23, 2011.

[ 3 ] In motions for security for costs in this matter brought by Cassels and Peebles and heard on August 25, 2011 (the “Second Security for Costs Motions”), I rendered reasons for decision (the “Second Reasons”) [2] in which I ordered Bruno and the Mauldin Group to post additional security for costs to Cassels and Peebles for Rule 39 examinations which had taken place and for upcoming steps in the actions.

[ 4 ] At the initial hearing of the Second Security for Costs Motions on August 25, 2011 (the “Initial Hearing”), plaintiffs’ counsel advised that he was not pursuing the position that either the Mauldin Group or Bruno was impecunious. Instead, plaintiffs’ counsel submitted that security for costs should not be ordered in either action since their claims against Cassels and Peebles in both actions had “overwhelming merit”. I rejected that submission on the basis of the evidence before me at the hearing, including the Grace Decision (Second Reasons at paras. 2-7).

[ 5 ] At the Initial Hearing, the plaintiffs further submitted that the court should reserve its decision until after the Court of Appeal delivered reasons on the appeals from the Grace Decision because the plaintiffs submitted that security for costs should be ordered against Hryniak and not against the plaintiffs if Hryniak was unsuccessful on the appeals. I rejected that submission and held that even if I had jurisdiction to order security for costs against a party who is not the plaintiff or applicant, such an order would not be just since Cassels and Peebles should not be exposed to any risk that the plaintiffs could not collect on a judgment against Hryniak (Second Reasons at paras. 10-16).

[ 6 ] Consequently, in the Second Reasons, I ordered Bruno and the Mauldin Group to post security for costs for Rule 39 examinations, and for the anticipated costs for discovery, mediation, pre-trial conference, and trial. The costs were to be paid at various times as the stages approached (Second Reasons at paras. 21-23).

[ 7 ] The plaintiffs in both actions appealed my decision on the Second Security for Costs Motions.

[ 8 ] Prior to the hearing of the appeals from my decision on the Second Security for Costs Motions, the Court of Appeal rendered its decision in the appeals from the Grace Decision. By decision dated December 5, 2011, cited as 2011 ONCA 764 (Dockets C52912 and C52913) (the “Court of Appeal Decision”), the Court of Appeal dismissed Hryniak’s appeal from the summary judgment granted by Justice Grace in the Mauldin Action and allowed Hryniak’s appeal from the summary judgment granted by Justice Grace in the Bruno Action.

[ 9 ] Justice Lederman heard the appeals from my decision on the Second Security for Costs Motions on April 2, 2012 and rendered his decision on April 16, 2012 (the “Lederman Decision”) [3]. Justice Lederman set out the issues raised before me at the Initial Hearing as follows (Lederman Decision at para. 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 ] Justice Lederman upheld my decision that Hryniak was not required to post any of the security for costs ordered against the plaintiffs, regardless of the result of the appeals of the Grace Decision. [4] Justice Lederman concluded (Lederman Decision at para. 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.

[ 11 ] Justice Lederman held that the plaintiffs had “mistakenly pegged” the standard of “overwhelming” likelihood of success at the hearing before me, and that the correct test under the law was that of a “good chance of success”. Justice Lederman held (Lederman Decision at paras. 15-16):

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.

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".

[ 12 ] Consequently, Justice Lederman held (Lederman Decision at para. 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.

[ 13 ] Justice Lederman remitted the matter to me to review the evidence and consider the merits of the case under the test of “good chance of success” as a factor when determining whether to order the plaintiffs to post security for costs. Justice Lederman held (Lederman Decision at para. 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.

[ 14 ] By decisions released June 28, 2012, the Supreme Court of Canada granted leave to appeal from the Court of Appeal Decision to (i) Hryniak in the Mauldin Action (Court File No. 34641) and (ii) Bruno in the Bruno Action (Court File No. 34645). [6]

[ 15 ] Consequently, I now address the issues arising out of the re-hearing of the Second Security for Costs Motions, applying the “good chance of success” test to my consideration of the merits of the plaintiffs’ claim.

(Decision continues exactly as in the provided text through paragraph [71], footnotes, and signature.)

Master Benjamin Glustein

DATE: July 27, 2012