SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 05-CV-285434 PD2

DATE: 20130206

RE: 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 Hyrniac, Defendants/Respondents

BEFORE: Carole J. Brown J.

COUNSEL:
J. Heydary, D. Alderson, for the Plaintiffs

L. Ritacca, H, Rosenstein, for the Defendants

HEARD: November 5, 2012

ENDORSEMENT

[1] The plaintiffs appeal from the Order of Master Benjamin Glustein, case management master for these proceedings, dated July 27, 2012, which ordered that the appellants post security for costs with respect to the next steps in these proceedings.

Standard of review

[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”: Zeitoun v Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131. Further, where the Master is exercising case management functions, as Master Glustein has been doing essentially since the inception of these proceedings, increased deference ought to be shown due to the unique role in the litigation process of case management masters: Zeitoun, supra.

[3] Moreover, an appeal from a Master's decision is not a rehearing. On questions of fact and mixed fact and law, deference applies and the role of the reviewing court is limited. The appellate court cannot substitute its interpretation of the facts or re-weigh the evidence simply because it takes a different view of the evidence from that of the Master: Wellwood v Ontario Provincial Police et al, 2010 ONCA 386.

[4] There is no disagreement among the parties with respect to the standard of review applicable in this case.

The Background Facts

[5] The Bruno action was commenced in March of 2005 and the Mauldin action was commenced in November of 2005.

[6] Master Glustein was appointed case management master of these actions from shortly after their commencement, and is familiar with the complicated factual and procedural aspects of the cases. He has decided numerous motions brought in these actions, including two previous orders for security for costs.

[7] In October of 2007, in the first motion for security for costs, Master Glustein found that the Bruno and Mauldin plaintiffs were non-residents, had no assets in Ontario, were not impecunious and ordered that the plaintiffs post security for costs in the actions.

[8] The plaintiffs thereafter brought motions for summary judgment in both actions. On October 22, 2010, Grace J. dismissed the summary judgment motions against the defendants, Cassels Brock & Blackwell LLP (“Cassels Brock”) and Gregory Jack Peebles (“Peebles”), but granted summary judgment against the defendant, Robert Hryniak (“Hrynik”).

[9] Hyrniak appealed the decision, which appeal was granted by the Court of Appeal in the Bruno action, but dismissed in the Mauldin action. Prior to the release of the Court of Appeal decision, Cassels Brock and Peebles brought motions before Master Glustein seeking orders that the plaintiffs post additional security for costs.

[10] Master Glustein found that the defendants had met their initial onus under Rule 56.01 (1) (a), given that the plaintiffs were not Ontario residents. The plaintiffs did not take the position that they were impecunious. Rather, the plaintiffs' counsel submitted that the merits of the claims against Cassels Brock and Peebles were so “overwhelming” that security for costs should not be ordered even though the plaintiffs were not impecunious. Further, they argued that if security for costs were appropriate, the Master should reserve his decision on the motion until the appeal decision was rendered, as security for costs should be ordered against Hryniak and not against the plaintiffs if Hyrniak were unsuccessful on the appeal. With respect to ordering security for costs as against Hryrniak, the Master 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 of this case, and held that such an Order against Hryniak would not be just regardless of the results of his appeals from summary judgments. This was upheld on appeal, where it was further observed that 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.

[11] At the hearing before Master Glustein, the plaintiffs had submitted that the case against Cassels Brock and Peebles had an “overwhelming” likelihood of success. The Master found that that was not so given Grace J.’s dismissal of the summary judgment motions as against Cassels Brock and Peebles.

[12] Regarding the plaintiff’s argument that there was an overwhelming likelihood of success against Cassels Brock and Peebles, Master Glustein found as follows:

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.

Accordingly, he ordered that the plaintiff post security for costs.

[13] The plaintiffs appealed the decision of Master Glustein regarding payment of security for costs. They did not dispute the amount ordered to be paid. On April 16, 2012, S. Lederman J. allowed the appeal in part and remitted the matter back to Master Glustein “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”. S. Lederman J. held that, in considering the justice of the case, Master Glustein had focused on the plaintiffs’ submission that that the standard to be used was “an overwhelming likelihood of success”, which was “too high”. S. Lederman J held that “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”, citing Zeitoun, supra. and Cigar500.com Inc v Ashton Distributors Inc. et al 2009 CanLll 46451 (Ont. S. C. J.). In allowing the appeal in part, S. Lederman J. found that the test is “a good chance of success” and that the Master should have examined the facts on the basis of that standard. He found as follows:

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 arguments. 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”.…

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 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.

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.”

The Master’s Decision Appealed From

[14] On July 27, 2012, Master Glustein rendered his decision on the rehearing, addressing the issues arising out of the rehearing and applying the “good chance of success” test to his consideration of the merits of the plaintiffs’ claim.

[15] The Master found, on reconsideration of the motion, applying the “good chance of success” test, that the plaintiffs had failed to establish a good chance of success on the merits, and exercised his discretion to award security for costs payable by the plaintiffs. It is from that decision that this appeal is taken.

The Parties Positions

[16] The plaintiffs argue that the Master erred in his interpretation of “good chance of success” and thereby in his application of that test. They argued that the Master erred by equating ‘good chance of success’ with the threshold of ‘a genuine issue requiring trial’. They argue that this threshold is not instructive of what actually constitutes a good chance of success, but instead, in conflating the unrelated tests, serves to obfuscate the analysis. They argue that the Master, in his analysis, held the plaintiffs' evidence to the summary judgment standard rather than to the standard of ‘good chance of success’. They argue that the plaintiffs’ claims and not the plaintiffs’ evidence need to be analyzed and weighed for purposes of determining ‘good chance of success’.

[17] I note that Justice Lederman, in remitting the matter to Master Glustein indicated that he was doing so in order for 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". Justice Lederman clearly directed that the Master was to scrutinize the evidence and findings to determine whether there was a good chance of success on the part of plaintiffs and, if so, to consider that factor in exercising his discretion regarding the making of a just order. Moreover, Justice Lederman directed that the rehearing be focused on this issue. He did not order a new or fresh hearing, as the plaintiffs urge.

[18] It is apparent from the decision of Master Glustein currently before this Court that the Master engaged in the inquiry in accordance with Justice Lederman's ruling on the first appeal.

[19] The plaintiffs further argue that the Master exercised his discretion on a wrong principle of law, failing to consider all relevant factors in the context of a new or fresh hearing in order to properly apply Rule 56.01 with respect to an order as to security for costs "as is just". They argue that other relevant factors to be considered include the possible effect of an order for security for costs preventing a bona fide claim from proceeding, and the overall justice of an order for security for costs against the plaintiffs. I note, with respect to the first aspect of the plaintiffs' argument that the plaintiff in the Bruno action acknowledged that it is not impecunious, and the plaintiffs in the Mauldin action had, on two previous occasions, failed to meet the test to establish impecuniousity. At the original hearing before Master Glustein, the plaintiffs did not raise the issue of impecuniousity. Indeed, on appeal, the issue before Justice Lederman was the appropriate test to consider under Rule 56.01 when a plaintiff is not impecunious.

[20] The defendants argue that the Master, in his 34 page decision, thoroughly, carefully and meticulously considered in detail all of the relevant evidence, as set forth in their factum at paragraphs 24 and 25, and engaged in a nuanced analysis of each of the factual issues individually, as well as collectively, to determine whether the plaintiffs could establish that they had a good chance of success.

[21] The defendants argue that the Master, in his analysis, focused on the alleged merits of the plaintiffs’ respective claims, as argued by the plaintiffs. They argue that a close scrutiny of the merits of the case is warranted, where impecuniousity is not an issue: Zeitoun, supra. Further, they argue, on the basis of Cigar500.com Inc, supra, that where the plaintiff is not impecunious, the onus is a high one and that the plaintiff must establish that its claim “has a good chance of success.” They argue that this is, in fact, the inquiry that the Master undertook at the rehearing.

[22] Further, the defendants argue that increased deference is owed to the decision of Master Glustein, who has case managed the actions from the beginning, is familiar with the nature of the claims, the conduct of the litigation and other relevant issues and, has decided other motions for security for costs in these actions.

Analysis and Conclusion

[23] The Master correctly defined the scope of the hearing as a rehearing of the initial hearing and not a relitigation of the issues that were or could have been raised in the initial hearing. S. Lederman J. had clearly ordered that the matter be remitted to the Master to address the factor of the merits of the plaintiffs claim, applying the standard of “a good chance of success” and to exercise his discretion accordingly. The matter was remitted not for a hearing de novo, but rather for a reconsideration of the merits of the claim applying the proper test. This was conceded by the plaintiffs in their argument before me.

[24] In his determination of whether an order for security for costs is just, the Master applied the correct approach, as set forth in Hallum v Canadian Memorial Chiropractic College, 1989 4354 (ON SC), [1989] O. J.. No. 1399 CarswellOnt 896 (H. C. J..); Horvat v Feldman, [1986] O. J. No. 2560 (H. C. J.); Georgian Windpower Corp.v Stelco Inc., [2012] O. J. No. 158 (S. C. J.).

[25] The Master appropriately referred to the test as set forth in Zeitoun, supra, Cigar500.com Inc., supra and as further set forth and defined in Stojanovic, supra. In applying the appropriate test, namely, “good chance of success”, the Master properly applied the test as set forth in Zeitoun v Economical Insurance Group, supra, and Cigar 500.com Inc. v Ashton Distributors Inc., supra, neither of which set out a precise test for determining whether a plaintiff on the security for costs motion has established a “good chance of success”, which is not surprising given the fact specific nature of the analysis. He further referred to the decision of Master Dash in Stojanovic v Bulut, 2011 ONSC 874, [2011] O. J. No. 840 which was referred to in the rehearing. In Zeitoun, supra, the Divisional Court observed that where impecuniousity has not been shown, a close scrutiny of the merits of the case is warranted. In Cigar500.com Inc. v Aston Distributors Inc., supra., it was confirmed by Code J. that the burden on a plaintiff who is not "impecunious" is a high one and that the plaintiff must establish that its claim "has a good chance of success".

[26] In the Master' s decision, the applicable test of “good chances of success” is described as follows:

I am not determining who will be successful at trial on a full evidentiary record. It is only necessary to determine on the basis of the evidence before me whether the plaintiff has a good chance of success. This is a higher standard than “not devoid of merit” but is not as high as proving the claim on a balance of probabilities at trial or establishing that there is no triable issue on a summary judgment motion.

… The test must be higher than the plaintiff establishing a genuine issue requiring a trial. A plaintiff may well be able to establish factual, legal and credibility issues which are genuine for trial, but that cannot satisfy the court that there is a good chance of success.

Following the approach taken by Master Dash in Stojanovic, the court in each case must determine whether the plaintiff has met the “good chance of success” standard. The court must review the pleadings, evidence, transcripts, and any other relevant fact before the court on the motion to determine if there is a good chance the plaintiff will succeed at trial. I do not purport to craft an all-encompassing definition of the test.

[27] I do not find that the Master conflated the “good chance of success test” with the summary judgment test, as urged by the appellant.

[28] The Master proceeded to review the pleadings, reasons of the courts in the Grace J. decision and in the Court of Appeal decision, all other evidence put before him at the initial hearing and at the rehearing to determine whether the plaintiffs had established a good chance of success at trial. He carefully considered the pleadings, reviewed and analyzed the evidence and, applying the appropriate test of ‘a good chance of success’, as ordered by S. Lederman J, found that the plaintiffs had not established a good chance of success on the merits. He found that the factor was neutral and, as such, ordered the plaintiffs post security for costs on the same terms as set out in the previous reasons, which amount was not disputed by the plaintiffs. Having reviewed the merits in light of the decision of Grace J. and the Court of Appeal, he noted that in both cases, issues of credibility, disputed factual issues and complex legal issues were present which he found “collectively demonstrate that the plaintiffs have not established a good chance of success. Consequently, the merits are neutral and do not constitute a factor in favour of the plaintiffs.”

[29] The Master had regard to all of the relevant factors as identified in the jurisprudence, correctly interpreted the scope of the rehearing based on Justice Lederman’s decision, and properly construed and applied the legal test pursuant to Justice Lederman’s decision in his thorough review on the rehearing.

[30] I do not find there to be any error of law in the Master’s decision, no error in the exercise of his discretion on the wrong principles and I do not find that he misapprehended the evidence such that there is a palpable and overriding error which would warrant this Court' s interference. The Master, who is and has been the case management master since the inception of these proceedings, carefully reviewed and analyzed the merits of the case, applied the proper test and exercised his discretion accordingly. Further, his decision to require security to be posted in stages reflects an appropriate balancing of the parties’ rights. I do not find there to be any reversible errors.

[31] Accordingly, this appeal is dismissed and the Order of the Master dated July 27, 2012 is upheld.

Costs

[32] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown J.

Date: February 6, 2013