Browne v. Toronto Star Newspapers Limited, 2015 ONSC 2376

CITATION: Browne v. Toronto Star Newspapers Limited, 2015 ONSC 2376

COURT FILE NO.: CV-08-368821

DATES HEARD: December 1 and 15, 2014 and January 22, 2015

ENDORSEMENT RELEASED: April 21, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SHIRLEY BROWNE v. TORONTO STAR NEWSPAPERS LIMITED, JAGODA PIKE, DON BABICK, DALE BRAZAO and CATHERINE MANUEL

BEFORE: Master R. Dash

COUNSEL: Charles Campbell and Shelina Ali, for the plaintiff

Paul Schabas, Iris Fischer and Emily Bala, for the defendants

REASONS FOR DECISION

[1] On September 12, 2008, the Toronto Star published an article entitled "Nanny sent to work as underpaid servant." The employer, a small innkeeper, commenced this action against the publisher and writer in libel.

[2] The defendants move for security for costs under section 12 of the Libel and Slander Act, R.S.O. 1990, c. L.12 (LSA). The motion arises in the most unusual and unique of circumstances. It also calls into question the very nature of the test for security for costs under the LSA and the role of charter protected values in determining and applying that test.

[3] The unusual and unique circumstances are these: After a 21 day trial (19 full or part days of evidence and 2 days of submissions) and while judgment was under reserve, the trial judge passed away before rendering her judgment. Before setting dates for the re-trial, the defendants determined, for the first time, to move for security for costs. The entirety of the trial transcript and written closing submissions have been available for use on this motion.

[4] The other unusual circumstance is that shortly before commencement of the trial, the plaintiff granted a half million dollar mortgage to her lawyers on her property, substantially reducing if not eliminating any equity therein which could otherwise have been exigible for the payment of any adverse cost award.

LEGAL ISSUES

[5] The legal issues are these:

(1) Is the test under section 12 of the LSA a conjunctive test or a disjunctive test? Must the defendants establish (a) that the plaintiff lacks assets to satisfy a costs award and (b) that the defendants have a good defence on the merits and made the statements in good faith or is it sufficient to satisfy only one of these criteria? There is conflicting case law.

(2) What is required to establish a "good defence on the merits"? Does it mean establishing a defence that is not frivolous or devoid of merit, a prima facie defence, an arguable defence, a strong defence, a defence that is likely to succeed, a defence that is more likely than not to succeed or a defence that is almost certain to succeed? There is a surprising absence of modern authority on this issue.

(3) What role is played by the recognized charter value of protection of reputation as well as the charter rights to freedom of expression and freedom of the press in interpreting the section? What role is played by these charter protected values in the exercise of my discretion in determining whether to order security for costs if the defendant meets the threshold test for security under the statute? To what extent is a right to clear one's name balanced against the possibility of libel chill on a newspaper?

BACKGROUND

[6] Catherine "Kay" Manuel ("Kay" or "Manuel") was a Philippine immigrant who came to Canada from Hong Kong on April 29, 2008 on a work permit to work as a nanny for a woman named Terra Holman ("Holman") in Toronto pursuant to the federal Live-In Caregiver program. She was to care for Holman's son, Brent. Kay was brought in by a nanny recruiting agency, Jinkholm International (the "Agency"), run by Heron Lloyd Tait ("Tait") to whom Kay was required to pay a $4,500 placement fee. When Kay arrived in Toronto, Holman was nowhere to be found. Instead Manuel was brought to work at a small inn in Jackson's Point called Whispering Pines, run by the plaintiff Shirley Browne, also known as Shirley Bollers ("Shirley" or "Ms. Browne" or "plaintiff"). She did a variety of work including cleaning and looking after guests and occasionally being in charge of the inn when Shirley and her domestic partner Peter Flaherty ("Flaherty") were away.

[7] The parties portray contrasting viewpoints of the relationship between Shirley and Kay. The defendants take the position that Shirley took advantage of Kay, illegally employed her and overworked her for low pay. Shirley takes the position that she took Kay in when Holman absconded, gave her an easy job which Kay liked and treated her as part of the family. Clearly however Kay's work at Whispering Pines was not work as a nanny, which was the only lawful work for which Kay could be employed under her work visa. Kay left her employment with Shirley after four months.

[8] On September 22, 2008, as part of a series of articles on nannies and foreign migrant workers, the Toronto Star ("Star") published an article written by the defendant Dale Brazao ("Brazao"), with a headline entitled:

"Nanny sent to work as underpaid servant",

and with a byline:

"Caregiver was shipped off to illegal job at inn".

[9] The plaintiff cites in her statement of claim 16 statements in the article that were defamatory of her "individually and collectively", including the headline and byline. Some of the more notable quotes from the article said to be defamatory include:

"Manuel was promised about $420 a week...Instead she was underpaid and worked 'morning, noon and night' as a cleaner, servant and handy woman."

"On her days off, the skilled caregiver was driven to Toronto to clean the apartment belonging to the innkeeper's boyfriend [...]"

"I just couldn't take it any more...I never wanted this. I did not come here to work illegally."

"What Manuel endured happens all too regularly [...] With more than 34,000 nannies and caregivers entering the country each year, most settling in the GTA, there is plenty of room for abuse."

"Manuel said she was turned over to innkeeper Shirley Bollers who worked her 'morning, noon and night, and then some."

"Manuel was underpaid at the inn compared to the Jinkholm contract that brought her to Canada. Her nanny contract [...] reveals she would have been paid about $420 a week, minus roughly $90 for room and board [...] At Whispering Pines, she received about $250 a week after room and board, but worked many more hours with no overtime."

"When she complained to Tait about the heavy workload and not being paid, Manuel said he told her to keep quiet because she was working illegally."

[10] Additional quotes from the article said to be defamatory include statements that Kay was told she had to crawl in the attic to insulate the inn, that Shirley would arbitrarily change her days off without notice and on two occasions was brought to Toronto on her days off to clean Flaherty's apartment for $60, that Shirley went on vacation for eight days and left her no food, that Shirley never issued her a pay slip showing mandatory deductions and that Tait knew Kay was working illegally at the inn but he did not apply for a change to her permit. It was also stated in the article that Shirley told the interviewer that Holman was her sister who was out of the country on contract work "and had asked her to look after Manuel until she returned", but later admitted they were not blood relatives.

[11] The article also said: "Brent and his mother never surfaced. Today, four months after she arrived in Canada, Manuel wonders if they really exist." While much was made of this statement in argument, it was not set out in the statement of claim as one of the defamatory statements.

[12] The plaintiff pleads that the words are not only defamatory in their plain and ordinary meaning but also convey the innuendo that the plaintiff "behaved illegally or abusively" to Kay "and that she was underpaid."

[13] Shortly before publishing the article, Brazao spoke to Shirley ostensibly to give him her side of the story. She then declined further interviews. After the article was published Flaherty sent in a lengthy rebuttal on behalf of Shirley, but the Star made a decision not to publish it or to write a follow up article. They invited Flaherty to send a letter to the editor. They published Flaherty's letter to the editor but unilaterally redacted its contents.

[14] The plaintiff pleads the unprofessional manner of the publication including a failure to check facts, ignoring the plaintiff's protests that they had false information, failing to follow up, failing to publish any correction, failing to publish correcting letters to the editor and sensationalizing the story with front page coverage and photos related to the plaintiff rather than the real culprit, the Agency.

THE ACTION

[15] On December 17, 2008 Shirley commenced this defamation action against the Star, and Brazao as well as two named publishers of the Star and Kay. The action was later discontinued as against Kay.

[16] By way of amended statement of defence the defendants plead (a) that the words are not defamatory, (b) that they are substantially true (the justification defence), (c) to the extent that the words bear the innuendo suggested by the plaintiff (that the plaintiff behaved illegally, that the plaintiff behaved abusively and that Kay was underpaid) they are opinions that a person could honestly hold on the facts set out in the article and are fair comment on matters of public interest, (d) that the article is a piece of responsible journalism on matters of public interest.

[17] Particulars of facts said to support the innuendo of illegality are centered on Kay's work permit being only for work as a nanny and only for Terra Holman. Particulars of facts said to support the innuendo of abusive behaviour include the plaintiff abusing Canadian laws and her authority over Kay by having Kay do work she was not permitted to do and Terra Holman was nowhere to be found. Particulars of facts said to support the innuendo of Kay being underpaid are said to be based on Kay working more hours at less pay as compared to the job she was to have with Ms. Holman.

[18] In support of the defence of responsible journalism, the defendants plead the public interest in the vulnerability of foreign caregivers, that the defendants took all reasonable steps to verify the information, that they made several attempts to interview the plaintiff and Flaherty and that the contents and pictures were a matter of editorial judgment.

[19] In short, the defendants say their article was investigative journalism, responsibly conducted, on an important matter of public interest, the exploitation of vulnerable foreign migrant workers. The plaintiff says the article was tabloid smear journalism and that it unfairly targeted the plaintiff, painting her as the villain, when the main targets of the story should have been the Agency and the missing Terra Holman.

[20] The action proceeded through discoveries, mediation and pre-trial conference. The trial was scheduled to commence on May 27, 2013 but was delayed a few days due to counsel's illness. The trial commenced on May 29, 2013 before The Honourable Madam Justice Lax and proceeded through 19 full or part days of trial ending on June 26, 2013. This was followed by two days of closing argument on July 10 and 11, 2013. The parties also filed detailed written closing submissions. Justice Lax reserved her decision. On November 4, 2013, Justice Lax passed away before rendering her decision.

[21] Rather than either party bringing a motion for summary judgment or conducting a fresh trial on the existing record, the parties agreed to a second retrial on oral evidence. Prior to setting a date for the second trial, the defendants indicated they would be bringing this motion for security for costs. It was determined that a new trial date would not be set until the final outcome of the motion now before me.

DELAY IN BRINGING MOTION

[22] Why did the defendants wait until after the death of Justice Lax to bring a motion for security for costs? No prior motion for security for costs had ever been brought. There are three main reasons advanced:

(a) It was not apparent until after the first trial that the plaintiff would be unable to pay an award of costs.

(b) The evidence at the first trial indicated to the defendants that they had a strong case.

(c) The plaintiff drove up the costs of the first trial due to unreasonable litigation conduct.

[23] The strength of the defendants' case will be discussed in that part of this endorsement dealing with "good defence on the merits".

[24] The alleged unreasonable litigation conduct includes (i) undertakings given by the plaintiff at discovery in 2009 and 2010 were not answered until February, March and May 2013 respecting tax returns and financial statements for the inn; (ii) last minute production of new relevant documents including Flaherty's diary produced May 15, 2013, Terra Holman's identity card on May 28, 2013 and the plaintiff's personal tax returns on May 28, 2013; (iii) changing positions about Terra Holman over the years and up to May 24, 2013; (iv) the plaintiff leading evidence about republication despite warnings from defendant's counsel that it had not been pled and was rejected by Justice Lax for that very reason; (v) overestimating the number of witnesses the plaintiff would call and (vi) excessive requests to admit.

[25] The litigation conduct alleged to be unreasonable increased the amount of costs incurred by the defendants and could affect the quantum of security for costs of the first trial if ordered. It also partly explains why, given the productions and positions taken just prior to and during trial, no motion for security was brought prior to the first trial. It has no effect on whether security should be ordered.

[26] The defendants' late discovery of information affecting the plaintiff's ability to pay costs does relate to the bona fides of the defendants bringing the motion only after the completion of the first trial and the death of the trial judge before rendering a decision. That information will also be a factor in the exercise of the court's discretion to make such order as is just if the defendants are found to have met the gateway criteria for an order for security for costs.

[27] The most important discovery relates to the provision by the plaintiff of two half million dollar mortgages to her lawyers on the eve of trial.

[28] The inn sits on land comprised of two adjacent parcels. The larger parcel is owned by a numbered company controlled by the plaintiff and the smaller parcel is owned directly by the plaintiff. The defendants' search of title in February 2013, three months before trial, indicated that the larger parcel was purchased in 2003 for $382,000 and was subject to a single encumbrance – a $472,000 institutional mortgage (to TD Bank). A new search conducted in September 2013 (a month after closing submissions at the first trial and while the decision was under reserve) indicated that a mortgage for $500,000 was registered to the plaintiff's lawyers, Iler Campbell, on March 25, 2013 (a month after the defendants' first title search and two months before the start of trial). A search conducted in January 2014 on the smaller parcel indicated it had been purchased in October 2003 for $30,000, was subject to a $250,000 institutional mortgage (to Community Trust) and another mortgage registered to Iler, Campbell on March 25, 2013 for $500,000. I assume (but with no evidence either way) that the mortgages to Iler Campbell on each property are collateral to each other.

[29] The defendants also discovered in February 2014 (after the first trial) that the inn and the properties upon which it stands have been listed for sale. The larger property is listed for $1,000,000 and the smaller property for $150,000. Their 2012 MPAC assessment values were respectively $511,000 and $95,000. There have been no actual valuations.

[30] The plaintiff was born in Guyana and she and Flaherty had visited it a number of times. In a January 2013 online article, Flaherty wrote that he and the plaintiff were "seriously considering making this country our place of residence, at least for the colder months of the Canadian year." It is not known when the defendants discovered this article.

[31] The plaintiff's personal tax returns provided to the defendants on the eve of trial indicate that the plaintiff's total income in the last few years was about $12,000 per year. The corporate financial statements show the inn was operating at a loss.

[32] The plaintiff failed to answer a request made on January 27, 2014 for evidence of any Ontario assets sufficient to cover an award of costs.

[33] As a result of the mortgages given to her lawyers (combined with the earlier institutional mortgages), the defendants are of the view that there is no equity now left in the properties to which they can look for their costs, if successful at the second trial. As a result of the listing and the on-line article, the defendants fear that the plaintiff plans to divest herself of her only significant asset and leave the country. The plaintiff has given no evidence on this motion to address the mortgages to her lawyers or her plans to leave the country.

[34] I wish to make clear that I find nothing unethical or deceitful about the plaintiff providing a mortgage to her lawyers, presumably to secure her legal fees, although the plaintiff has never confirmed that that was the purpose of the mortgages. The plaintiff requires representation and her lawyers are entitled to be paid. That is an access to justice issue. It does however mean there will be nothing left for the defendants should costs be awarded in their favour.

THE DEFENDANTS' COSTS

[35] The defendants claim that they have incurred actual legal costs of defending the action through the first trial and up November 2014 in the amount of $926,865 and their bill of costs indicates costs to date on a substantial indemnity scale to be $675,902. They claim security for those costs to date on a partial indemnity scale in the sum of $458,483. They estimate future costs through a second trial (including the costs of this motion) on a substantial indemnity scale to be $376,364 and claim security for those future costs on a partial indemnity scale in the sum of $254,943. All sums are inclusive of disbursements and HST. The defendants' total substantial indemnity costs are estimated to be $1,016,521 including both trials. They seek security for past and future costs on a partial indemnity scale in the sum of $713,426.

THE MOTION FOR SECURITY

[36] In a libel action, a defendant may seek security for costs under either or both of section 12 of the LSA and rule 56.01 of the rules of civil procedure as long as the particular subrule under which an order is sought does not conflict with section 12[^1]. Only subrule 56.01(1)(e) might conflict with section 12[^2], but that is of no consequence to this motion since the defendants do not rely on either rule 56.01(1)(e) (good reason to believe that the action is frivolous and vexatious and that the plaintiff has insufficient assets to pay costs) or the conflicting portion of section 12(1) (that the grounds of the action are trivial or frivolous).

[37] The defendants move only under section 12 of the LSA and do not move under any of the subsections of rule 56.01.

[38] Section 12 of the LSA reads as follows:

12. (1) In an action for a libel in a newspaper or in a broadcast, the defendant may, at any time after the delivery of the statement of claim or the expiry of the time within which it should have been delivered, apply to the court for security for costs, upon notice and an affidavit by the defendant or the defendant's agent showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements complained of were made in good faith, or that the grounds of action are trivial or frivolous, and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, and the order is a stay of proceedings until the security is given.

[39] The defendants rely on what they claim are two alternative disjunctive grounds under section 12 to found an order for security. They claim that (a) the plaintiff is not possessed of sufficient property to answer costs as may be awarded to the defendants and in addition or in the alternative (b) that the defendant has a good defence on the merits and that the impugned statements were made in good faith.

THE PROCEDURE UNDER SECTION 12

[40] The portion of the statute that reads "the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario" has been interpreted to mean that the practice in motions for security under section 12 expressly adopts the practice for giving security under the Rules.[^3]

[41] Under rule 56.01, the defendant has the initial onus of satisfying the court that it appears that one of the six enumerated grounds under the rule exists. This then triggers an enquiry as to whether security for costs should be ordered.[^4] At that stage the onus is on the plaintiff to convince the court that security should not be ordered.

[42] Once an enquiry is triggered:

The court must then take into account a number of factors and make such order as is just. Factors include the merits of the claim, the financial circumstances of the plaintiff and the possible effect of an order for security preventing a bona fide claim from proceeding. There is a broad discretion in the court in making such order as is just. The onus is on the plaintiff to establish that an order for security would be unjust.

Of course this is not an exhaustive list of factors that the court may take into account in determining such order as is just. As noted, the court has a broad discretion.[^5]

[43] If a plaintiff is able to demonstrate that he is impecunious, such that there is a danger that the plaintiff's poverty would cause an injustice by impeding pursuit of a claim that otherwise would be permitted to be tried, he need only demonstrate that his action is not plainly devoid of merit, a very low standard, to shield him from an order for security. Where impecuniosity cannot be shown, such that there is no danger that the plaintiff's poverty would bring the lawsuit to an end, then "a legitimate factor in deciding whether or not to require security for costs is whether the claim has a good chance of success." This would warrant a closer examination of the merits of the claim.[^6]

[44] As stated however, while the plaintiff's financial situation and the merits are important to consider in determining whether to order security, the court has a broad discretion whether to order security and may consider all relevant factors in the exercise of that discretion.

[45] The same analysis is undertaken when the defendants move under section 12 of the LSA rather than under the Rules. A recent decision has set out a similar analysis on a motion for security under section 18 of the LSA.[^7] It was held that once one of the criteria under section 18 is made out (in that case that the defendant had shown a good defence on the merits), "such a finding is sufficient to trigger the court's discretion" under section 18.[^8]

[46] Once the defendant has proven one of the gateway criteria, the onus is on the plaintiff to show why an order should not be made.[^9]

[47] The court stated:

This brings us to the second stage of the analysis required under sub-section 18 (1) of the Libel and Slander Act which is whether the court should, in the circumstances, exercise its discretion and make an order for security for costs...Such language clearly calls, once the first step has been met, for the court to exercise, on a principled basis, its discretion and decide whether an order for security for costs would, in the circumstances, be just.[^10]

[48] It was held that at the second stage of the enquiry the plaintiff is entitled to lead evidence relevant to his ability to pay costs if unsuccessful. The plaintiff however is not restricted to such evidence and he may "point to other reasons why such an order might not be just in the circumstances" and "in exercising its discretion, the court must consider all relevant factors." [^11]

DOES SECTION 12 SET OUT A CONJUNCTIVE OR DISJUNCTIVE TEST?

[49] As stated, the defendants rely on what they claim are two alternative disjunctive grounds under section 12 to found an order for security. They claim that security may be founded solely on the ground that the plaintiff is not possessed of sufficient property to answer costs as may be awarded to the defendants. In the alternative (or in addition) they claim that security may be founded solely on the ground that the defendant has a good defence on the merits and that the impugned statements were made in good faith. They do not rely on the third available ground – that the grounds of the action are trivial or frivolous.

[50] The plaintiff disagrees that the two grounds relied on by the defendants are alternative grounds and states both grounds must be proven as part of a conjunctive test.

[51] The key part of the section that gives rise to ambiguity, with the co-ordinating conjunctions italicized is as follows:

...showing...that the plaintiff is not possessed of property sufficient to answer the costs of the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements complained of were made in good faith, or that the grounds of action are trivial or frivolous... (emphasis added)

The Alternate Interpretations

[52] The plaintiff says there are only two available grounds. The first available ground invites a conjunctive reading of section 12 and would require the defendants to prove all three of the following criteria: (a) the plaintiff is not possessed of sufficient property to answer costs and (b) the defendant has a good defence on the merits and (c) the impugned statements were made in good faith. The second available stand-alone ground (which is not invoked by the defendants on this motion) is that the grounds of the action are trivial or frivolous.

[53] The defendants say there are three available alternate grounds. This invites a disjunctive reading of section 12 and would require the defendants to prove only one of the following criteria: (a) the plaintiff is not possessed of sufficient property to answer costs or (b) the defendant has a good defence on the merits and the impugned statements were made in good faith or (c) that the grounds of the action are trivial or frivolous.

[54] This distinction is of great importance on the matter before me. The defendants have handily demonstrated that the plaintiff has insufficient property to answer costs and indeed the plaintiff admits she does not have sufficient assets to pay costs. Whether the defendants can demonstrate that they have a good defence on the merits is a much more challenging exercise and is by no means certain. Thus, if the test is disjunctive, the defendants could trigger the second stage of the enquiry merely by showing the plaintiff has insufficient assets. If the test is conjunctive they would, in addition to demonstrating that the plaintiff has insufficient assets to pay costs, also have to show that they had a good defence on the merits and acted in good faith.

[55] The difference between the conjunctive and the disjunctive approach turns on whether the key conjunction that co-ordinates the alternate grounds for security is the "and" or the "or" and whether the "and" co-ordinates only "that the defendant has a good defence on the merits" and "that the statements complained of were made in good faith" (the disjunctive test) or whether it co-ordinates all of "that the plaintiff is not possessed of property sufficient to answer the costs of the action" and "that the defendant has a good defence on the merits" and "that the statements complained of were made in good faith" (the conjunctive test) .

[56] "That the grounds of action are trivial or frivolous" is a separate and stand-alone test for security. That is not a ground sought on this motion. I am asked to determine whether the balance of the test is conjunctive or disjunctive.

[57] The plaintiff argues that the test is conjunctive. In other words the defendant must establish three things: 1. "that the plaintiff is not possessed of property sufficient to answer the costs of the action" [and] 2. "that the defendant has a good defence on the merits" and 3. "that the statements complained of were made in good faith". As a second alternative to the single three-part test, the defendant could establish "that the grounds of action are trivial or frivolous".

[58] The defendant argues that the test is disjunctive. In other words the defendant must establish only either of two things: 1. "that the plaintiff is not possessed of property sufficient to answer the costs of the action" [or] 2. "that the defendant has a good defence on the merits and that the statements complained of were made in good faith". As a third alternative to the two alternate tests, the defendant could establish "that the grounds of action are trivial or frivolous".

[59] There is a third possible interpretation of the section suggested by some of the cases and it is an alternate version of the conjunctive test: the defendant must establish 1. "that the plaintiff is not possessed of property sufficient to answer the costs of the action" [and] 2. "that the defendant has a good defence on the merits" and 3. "that the statements complained of were made in good faith or that the grounds of action are trivial or frivolous" In this interpretation establishing "trivial or frivolous" is not a stand-alone ground for security but is an alternative to establishing the third criteria - that the statements "were made in good faith." Neither party advocates for this interpretation.

[60] The conundrum can perhaps best be expressed by a formula where:

a = "the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant"

b = "the defendant has a good defence on the merits"

c = "the statements complained of were made in good faith"

d = "the grounds of action are trivial or frivolous".

Section 12 of the LSA, using the conjunctions and punctuation in that section would then read that the defendant must show:

"a, b and c, or d"

[61] The three alternative interpretations would then be:

1. The disjunctive interpretation would require the defendant to show:

[a] or [b and c] or [d]

2. The conjunctive interpretation would require the defendant to show:

[a and b and c] or [d]

3. The alternative conjunctive interpretation would require the defendant to show:

[a] and [b] and [c or d]

[62] For purposes of this motion, both alternative conjunctive tests come to the same result. Since there is no reliance on the action being trivial or vexatious as a ground, it is unnecessary to resolve whether "trivial or vexatious" is a stand-alone ground or whether it is an alternative to showing that the statements were made in good faith. The conjunctive test would thus require the defendant to show:

a and b and c

The Conjunctive Cases

[63] All of the cases in the Superior Court and the Divisional Court between 1976 and 2003 brought to my attention (with one exception that was subsequently rejected) set out the test as conjunctive – that the defendant has a three-part test to meet.

[64] In Robinson v. Mills[^12], a 1909 decision of the High Court of Justice, Riddell J. held that the defendant must show:

(1) the nature of the action; (2) the nature of the defence; (3) that the plaintiff is not possessed of property sufficient to answer costs (these three are the same in each statute); (4) that the defendant has a good defence on the merits; and (5) either (a) that the statements complained of were published in good faith, or (b) that the grounds of action are trivial or frivolous.

This in essence is the alternate version of the conjunctive test.

[65] The defendants argue that the statute under consideration by Riddell J. was the 1887 version of the statute[^13] which had an additional "and" in the wording lending more readily to the conjunctive interpretation: the defendant must file an affidavit "shewing the nature of the action and of the defence, and shewing that the plaintiff is not possessed of property sufficient to answer the costs of the action in case a verdict or judgment be given in favour of the defendant, and that the defendant has a good defence upon the merits and that the statements complained about were published in good faith, or that the grounds of action are trivial or frivolous...". (emphasis added).

[66] The "and" before "that the defendant has a good defence upon the merits" was not carried forward to revisions of the statute in 1909 and 1958. The 1909 version of the statute[^14] reads: the defendant must file an affidavit "shewing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case a judgment is given in favour of the defendant, that the defendant has a good defence on the merits, and that the statements complained of were published in good faith, or that the grounds of the action are trivial or frivolous...". The 1958 version[^15] reads: that the defendant must file an affidavit "showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements were complained about were made in good faith, or that the grounds of action are trivial or frivolous." The 1958 version is virtually identical to the current version of the LSA.

[67] The defendants submit that the changes made to the wording of the statute in 1909 and subsequent versions, deleting the word "and" before "the defendant has a good defence upon the merits" changed the conjunctive test to a disjunctive one. The defendants have not suggested any rationale for that change nor have the debates of the legislature at the time those statutes were revised been provided.

[68] Robinson was quoted and followed in 1966 by Senior Master Rodger in Oshanek v. Toronto Daily Star[^16] where he stated:

As I read s. 13(1) of the Libel and Slander Act, the defendant, in order to succeed on an application of this kind, must show that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant and either that the statements complained of were made in good faith or that the grounds of action are trivial or frivolous. Showing that the grounds of action are trivial or frivolous would appear to be an alternative to showing that the statements complained of were made in good faith, but not an alternative to showing that the plaintiff is not possessed of property sufficient to answer the costs of the action...

This is another variation of the alternate conjunctive test. The Senior Master was clear in stating that insufficiency of assets to meet costs was not a stand-alone ground for security. The Master was referencing the 1958 version of the statute, which is virtually identical to the present version; however he neither discussed nor distinguished the wording of the 1887 statute upon which Robinson was based.

[69] In 1972, in Hill v. Creed Furs Ltd.[^17] Senior Master Rodger was examining the slander, rather than the libel section of the statute and determined that the disjunctive interpretation was correct. He stated:

As I read s. 20, the application of a defendant for security for costs under s-s. (1) may be founded upon one or more of three possible grounds, namely:

1.That the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant; or

2.that the defendant has a good defence on the merits; or

3.that the grounds of action are trivial or frivolous.

As will be seen, several judges of the High Court subsequently were critical of Hill and refused to follow it, preferring Master Rodger's earlier ruling in Oshanek.

[70] In 1976 in Nikolic v. Northern Life Publishing Co.[^18] Southey J. was directly called upon to determine if the test was conjunctive or disjunctive. Southey J. rejected the master's disjunctive interpretation in Hill and accepted the master's earlier conjunctive interpretation in Oshanek. In so doing, he stated:

In the present case the defendants do not suggest that the grounds of action are trivial or frivolous... The position taken by the defendants is that they meet the requirements of s. 13 if they have shown that the plaintiffs are not possessed of property sufficient to answer the costs of the action in case judgment was given in favour of the defendants, and that it is unnecessary for them to establish by affidavit that they have a good defence upon the merits and that the statements complained of were made in good faith. In taking this position the defendants rely upon the decision of Senior Master Rodger in Hill v. Creed Furs Ltd...With the greatest respect for the learned Senior Master, I cannot accept his interpretation of s. 13(1). In my view the defendants to succeed under that section must show in their affidavit that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, and that the defendant has a good defence on the merits, and that the statements complained of were made in good faith. In addition, of course, the defendants must show the nature of the action and of the defence but I think those two basic points would be quite apparent in any case in which the other three facts or matters were established. The interpretation which I have held must be given to the section is the same as that given in Oshanek v. Toronto Daily Star...or in earlier authorities referred to in that decision.

Southey J. held that establishing insufficency of assets is not enough to entitle an order for security. The defendants must also show a good defence on the merits and that their statements were made in good faith. This is a clear expression of the conjunctive test made in interpreting the curent version of the statute.

[71] Six months later in Gunn v. North York Public Library[^19], Robins J. came to the same conclusion as Southey J. in Nikolic, but without reference to Nikolic. Like in Nikolic, Robins J. rejected the decision of the master in Hill in favour of the decisions in Robinson and Oshanek. In so doing he clearly accepted and set out the conjunctive test as follows:

With deference to the learned Senior Master [in Hill v. Creed Furs Ltd.], I do not agree with his interpretation of s. 20(1). In my opinion an application for security for costs under s. 20(1) may not be founded on one or more of three possible grounds. Before a plaintiff can be ordered to give security for costs a defendant, as I read the section, is required to show by affidavit:

(1) the nature of the action and of the defence,

(2) that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, and

(3) either (a) that the defendant has a good defence on the merits, or (b) that the grounds of action are trivial or frivolous.

Robins J. goes on to state that the construction under what is now section 18 of the LSA (slander) is the same as that which has been placed under what is now section 12 (libel in a newspaper), despite a "slight" variation in wording. (There is no good faith requirement in the slander section.)

[72] In 2003, Then J. sitting on a leave to appeal motion in Divisional Court in Howard-Azzeh v. St. Catherines Standard Group Inc.[^20], was primarily concerned with an argument that section 12 of the LSA applied only to non-resident plaintiffs because of the wording in section 12 that any order made for security "shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario". He determined "that it is clear from a plain reading of the statute that s. 12(1) does not require the plaintiff to be resident outside of Ontario". He went on however to articulate (without any analysis) the alternative conjunctive test for obtaining security under section 12 (similar to that in Robinson) as follows:

In order for the Court to order security for costs pursuant to s. 12(1) of the Libel and Slander Act, the following requirements must be satisfied:

(1) The plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant;

(2) The defendant has a good defence on the merits; and

(3) a) the statements complained of were made in good faith or b) the grounds of the action are trivial or frivolous.

The Disjunctive Cases

[73] In 2005 the court of appeal in Khan v. Metroland Printing, Publishing & Distributing Ltd.[^21] was called upon to determine "whether...the LSA precludes security for costs orders under the Rules."[^22] In that case the motions judge made an order for security under rule 56.09, but the Divisional Court had determined "that the LSA ousts the jurisdiction under the Rules to order security for costs under rule 56.09"[^23] The court of appeal considered the enumerated sections of rule 56.01 as well as rule 56.09 and concluded: "Since s. 12(1) demonstrates an intention to co-exist with the Rules, I conclude that an order for security for costs may be made under rule 56 in cases to which the LSA applies, so long as the particular sub-rule under which the order is made does not directly conflict with s. 12(1) of the LSA." The court concluded that the motions judge had the jurisdiction to consider the issue of security for costs under the rules and turned its mind to the basis upon which security could be ordered under rule 56.09.[^24]

[74] The court of appeal in Khan was not called upon to determine nor did it turn its mind to whether the test under section 12 of the LSA was conjunctive or disjunctive. The parties were not seeking security under section 12. The court was concerned with the test under rule 56.09. Nonetheless, the court quoted section 12(1) of the LSA in a manner that grammatically suggests that the test is disjunctive. The court stated:

Section 12(1) of the LSA provides for security for costs in libel and slander cases in the limited circumstances where:

(1) the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant;

(2) the defendant has a good defence on the merits and that the statements complained of were made in good faith; or

(3) the grounds of action are trivial or frivolous.[^25]

[75] At first blush, the insertion of semi-colons and the placement of the conjunction "or" in this quote would indeed suggest that the court was enumerating a disjunctive test – that any one of three bases could ground an order for security. That would mean that if a plaintiff had insufficient assets to pay costs, security could be ordered without proving that the defendant has a good defence on the merits. In my view, it would be inappropriate to rely upon this passage to conclude that the court had intended to set out a disjunctive test, since the court was not called upon to determine and provided no analysis of whether the test was conjunctive or disjunctive. The court was concerned with Rule 56, not section 12 of the LSA except to determine if section 12 ousted the application of the Rules. Its comments about section 12 were obiter and not relevant to or necessary to decide the issue that was before it to determine.

[76] Nonetheless the court did make certain statements to suggest that the test under the LSA was a strict test to be applied only in limited circumstances, as compared to the broader test under Rule 56. The court stated:

Section 12(1)...provides security for costs, but only in limited circumstances and under fairly onerous conditions. By contrast, rule 56 of the rules of civil procedure...also provides security for costs, but in a broader range of circumstances and under less stringent conditions.[^26]

[77] The court in Khan also referenced the decision of Van Riessen v. Canada (Attorney General)[^27] in which:

the motion judge determined that s. 56.01(a) of the Rules cannot be read as supplementing s. 10 of the Public Authorities Protection Act (PAPA), which provides for security for costs based on a test that is closely analogous to the test under s. 12(1) of the LSA (insufficient assets on the part of the plaintiff and good defence on the merits, or grounds indicating that the action is frivolous).[^28] (emphasis added)

The court appeared to suggest that the test under PAPA was analogous to that under section 12(1) of the LSA and that was a conjunctive test – requiring proof of insufficiency of assets as well as good defence shown on the merits. This is at odds with its earlier recitation of the test.

[78] The defendants have suggested that the changes in the placement of conjunctions and punctuation in section 12 between the 1909 and 1958 versions of the LSA may account for the different approach in the earlier cases and in Khan and several other cases that have been referenced. The court of appeal in Khan however seems to suggest that is not the case. It stated:

Ontario first enacted defamation legislation in 1887. This legislation included the security for costs provision, which is continued - with minor unrelated changes - as s. 12(1) of the current LSA.

[79] The first case brought to my attention that clearly articulates a disjunctive test is that of Justice Quigley in Elguindy v. Koren.[^29] In Elguindy the plaintiff sued her husband and his lawyer in slander for remarks made during the course of a matrimonial proceeding. The defendants moved to strike the statement of claim as frivolous and vexatious and in the alternative for security for costs on a number of grounds.

[80] Although Justice Quigley struck the statement of claim as frivolous and vexatious he ordered that if it were determined he erred in doing so, then the plaintiffs would post security for costs.[^30] In coming to that conclusion he clearly and unequivocally sets out that the test under section 18(1) of the LSA was a disjunctive test in the following passage:

As previously noted, the defendants will be entitled to an order for security for costs if they are able to show that they have a good defence on the merits, that the plaintiff does not have sufficient assets to answer the costs of the action if the defendant wins, or that the grounds of the action are trivial or frivolous. Not all of these requirements must be established. It is sufficient if any single factor is proven by the defendants.[^31]

[81] There is nothing in the decision of Justice Quigley that indicates that the parties argued whether the test was conjunctive or disjunctive or that Justice Quigley was called upon to make that determination. Indeed the plaintiffs were self-represented. Justice Quigley did not refer to Khan. He did not refer to any of the previous cases that set out a conjunctive or alternate conjunctive test such as Robinson, Oshanek, Nikolic, Gunn or Howard-Azzeh.

[82] It must be borne in mind that the motion for security in Elguindy was not in a libel action brought under section 12(1) of the LSA, but in a slander action and thus brought under section 18(1) of the LSA which reads:

In an action for slander, the defendant may, at any time after the delivery of the statement of claim or the expiry of the time within which it should have been delivered, apply to the court for security for costs, upon notice and an affidavit by the defendant or the defendant's agent showing the nature of the action and of the defence, that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits, or that the grounds of action are trivial or frivolous, and the court may make an order for the plaintiff to give security for costs, which shall be given in accordance with the practice in cases where a plaintiff resides out of Ontario, and the order is a stay of proceedings until the security is given.

[83] While there are considerable similarities between sections 12(1) and 18(1), section 18(1) is missing the co-ordinating conjunction "and" that appears in section 12(1). Section 12(1) reads "that the plaintiff is not possessed of property sufficient to answer the costs of the action in case judgment is given in favour of the defendant, that the defendant has a good defence on the merits and that the statements complained of were made in good faith, or that the grounds of action are trivial or frivolous". The emphasized passage "and that the statements were made in good faith" does not appear in section 18(1).

[84] In Elguindy, the defendants' motion was brought prior to delivery of a statement of defence. Justice Quigley explains why the nature of claims for slander permit a motion for security for costs to be brought prior to defence, while under rule 56.01 a motion for security can only be brought after a defence is delivered:

A different less rigorous procedure applies in the case of slander claims, clearly based on the dual public policy objectives that persons who allege that they have been slandered ought not to be able to put defendants to the cost of defending against claims that may be spurious in nature or lacking in any apparent evidentiary foundation, without providing security to indemnify the defendants against the costs of baseless claims that may be awarded in the defendant's favour, and to discourage hastily filed actions by impressing on the plaintiff the gravity of the litigation.[^32]

[85] Indeed, security was ordered in Elguindy because the impugned statements were made during a judicial proceeding and thus absolutely privileged whether or not the words were knowingly false and spoken in bad faith.[^33] As such the defendants demonstrated that they had a good defence on the merits and alternatively that the claim was frivolous and vexatious.[^34]

[86] Elguindy was followed by several masters' decisions.

[87] In Parent v. Campbell[^35], also a motion for security for costs under section 18(1) of the LSA, Master Roger acknowledged that "although there are conflicting statements made in earlier decisions", he relied upon Khan and Elguindy to conclude that the disjunctive interpretation "complied with more recent decisions of this court and with comments made by the Court of Appeal."[^36] He then concluded on the basis of those decisions that under sub-section 18(1), the moving party must show either that the plaintiff does not have sufficient assets to answer the costs of the action or that the defendant has a good defence on the merits or that the grounds of the actions are trivial or frivolous. "Only one of these needs to be established."[^37] Master Roger summarized the disjunctive test that he accepted as follows:

In the first part of the analysis, only one of the three factors listed at sub-section 18 (1) needs to be shown by the moving party. This complies with the public policy objectives outlined by the court at paragraph 25 of Elguindy. In other words, under sub-section 18 (1), the moving party need only show a trivial or frivolous action or a good defence on the merits and need not show that the plaintiff has insufficient assets to be successful at the first step of the analysis. Alternatively, a moving party at the first step may wish to only show that the plaintiff does not have sufficient property to answer costs.[^38]

[88] In Health Genetic Center Corp. v. Reed Business Information Ltd.[^39], I heard a motion for security for costs under the Rules and under section 12(1) of the LSA. I stated, quoting Elguindy and Parent:

Section 12 sets out three alternative bases to award security in a libel action: (a) the plaintiff is not possessed of property sufficient to pay costs of the action as may be awarded, or (b) the defendant has a good defence on the merits and the statements complained of were made in good faith, or (c) the grounds of action are trivial or frivolous. The moving party need prove only one of the bases for security, not all three.[^40]

There was no argument on the motion then before me whether the test was conjunctive or disjunctive and I simply adopted the conclusions in Elguindy and Parent without consideration or analysis. Health Genetic is under appeal, but the appeal has not yet been determined.

Constitutional Principles as an Aid to Interpretation

[89] In my view section 12 lends itself grammatically to either test. It is ambiguous and the answer not apparent. How then do I resolve which test is correct? That question has now been placed directly before me by both counsel as an issue on this motion.

[90] A good starting point would be to consider the principles and constitutional values involved in defamation actions and for making orders for security for costs in such actions.

[91] Clearly freedom of expression and of the press is a constitutionally enshrined right. The Charter of Rights and Freedom provides that everyone has as a fundamental freedom:

freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication[^41]

[92] Freedom of speech, including freedom of the press, is not without restrictions. One of those restrictions is found in the law of defamation.

[93] In Hill v. Church of Scientology of Toronto[^42], the Supreme Court of Canada recognized that although protection of an individual's reputation is not listed in the Charter as a constitutional right, it is nonetheless entitled to protection under the law. The court stated that freedom of expression is a core value of a democratic society, but that it must be balanced against protection of the reputation of the individual, which must also be protected under society's laws:

The other value to be balanced in a defamation action is the protection of the reputation of the individual. Although much has very properly been said and written about the importance of freedom of expression, little has been written of the importance of reputation. Yet, to most people, their good reputation is to be cherished above all. A good reputation is closely related to the innate worthiness and dignity of the individual. It is an attribute that must, just as much as freedom of expression, be protected by society's laws. In order to undertake the balancing required by this case, something must be said about the value of reputation.[^43]

[94] The reasons for society's protection of reputation includes:

A good reputation is closely related to the innate worthiness and dignity of the individual.[^44]

False allegations can so very quickly and completely destroy a good reputation. A reputation tarnished by libel can seldom regain its former lustre.[^45]

Further, reputation is intimately related to the right to privacy which has been accorded constitutional protection...The publication of defamatory comments constitutes an invasion of the individual's personal privacy and is an affront to that person's dignity.[^46]

[95] The Supreme Court stated that in libel actions there must be some balancing of these two important but clashing principles:

There can be no doubt that in libel cases the twin values of reputation and freedom of expression will clash.[^47]

The protection of a person's reputation is indeed worthy of protection in our democratic society and must be carefully balanced against the equally important right of freedom of expression.[^48]

[96] In the later case of Grant v. Torstar Corp.[^49] the Supreme Court of Canada recognized a new "defence of responsible communications on matters of public interest"[^50] to respond to what had been described as "libel chill" whereby a journalist or publisher who diligently tries verify a story on a matter of public interest could still have been held liable if he could not prove that the story was true, thereby undermining freedom of expression and of the press.[^51]

[97] Grant confirmed that freedom of expression is guaranteed by section 2(b) of the Charter and "is essential to the functioning of our democracy, to seek the truth in diverse fields of enquiry",[^52] but also referenced the need to balance that right against the legally recognized protection of reputation:

Two conflicting values are at stake -- on the one hand freedom of expression and on the other the protection of reputation. While freedom of expression is a fundamental freedom protected by s. 2(b) of the Charter, courts have long recognized that protection of reputation is also worthy of legal recognition. The challenge of courts has been to strike an appropriate balance between them in articulating the common law of defamation.[^53]

[98] In my view the balancing of freedom of expression and of the press with protection of reputation, which informs libel laws generally, must also be seen as informing the determination of security for costs motions in libel actions and in interpreting section 12 of the LSA.

[99] None of the cases to which I have been directed have considered the balancing of these two important principles in determining whether the test under section 12 of the LSA is conjunctive or disjunctive.

[100] As I noted earlier, the court of appeal in Khan in one paragraph set out what it described as the "limited circumstances" in which section 12 of the LSA provides for security for costs and the court's wording appears to set out a disjunctive test.[^54] However, as I also noted earlier, the court in Khan was not determining security under the LSA, but rather under Rule 56 and was called upon to decide whether a defendant in a libel action could seek security under the Rules (or was restricted to section 12 of the LSA). The court was not asked to consider whether section 12 set out a conjunctive or disjunctive test. It provided no analysis in that regard nor were the competing constitutional principles considered. The setting out of section 12 in a disjunctive manner was clearly obiter, not related to or part of the ratio decidendi and not binding.[^55]

Conclusion: Test is Conjunctive

[101] For reasons that follow, I prefer the conclusions in Robinson, Oshanek, Nikolic, Gunn and Howard-Azzeh that the test is conjunctive rather than the conclusions in Elguindy and Parent (and the dicta in Khan) that the test is disjunctive.

[102] In Elguindy, even though Quigley J. determined that the test was disjunctive (without any discussion of the above principles) and although he was commenting on the right to bring a security for costs motion prior to defence, his remarks about the purpose of security for costs in a defamation action are apposite:

[P]ersons who allege that they have been slandered ought not to be able to put defendants to the cost of defending against claims that may be spurious in nature or lacking in any apparent evidentiary foundation, without providing security to indemnify the defendants against the costs of baseless claims that may be awarded in the defendant's favour, and to discourage hastily filed actions by impressing on the plaintiff the gravity of the litigation.[^56]

The concerns expressed by Quigley J. are directed to defendants having to defend baseless claims without security.

[103] In my view, balancing the two legally protected values of freedom of expression and protection of reputation leads me to the conclusion in interpreting section 12 that security should be ordered against a plaintiff who brings a defamation action with little merit unless he has the demonstrated means to pay for the costs that may be awarded in the defendants' favour. The corollary is that a plaintiff who has a good case in defamation should be permitted to proceed with the action whether or not he has demonstrated exigible assets to pay costs.

[104] With this interpretation, a defendant who is likely to succeed at trial is protected and will recover its costs either by collecting its costs after trial against the plaintiff's exigible assets or by payment of security into court if the plaintiff does not have sufficient exigible assets to pay costs. In my view this supports the defendants' constitutionally protected right of freedom of the press while also supporting the right of a plaintiff with a meritorious case, but who is without sufficient assets, to take steps to protect his reputation.

[105] If it were otherwise, an individual plaintiff with a good case, who has taken proceedings to protect his reputation against allegedly defamatory comments, could be forced to provide security for no other reason than she does not have sufficient assets to cover the defendants' anticipated costs. In this case the defendants value their costs on a partial indemnity scale at $713,426. That is a very significant sum of money to most people. That cannot be consistent with the legally recognized right to protect one's reputation.

[106] This in turns leads to a conjunctive interpretation of section 12 of the LSA, which I have determined is grammatically ambiguous. This means that unless an action is trivial or frivolous, the defendants, in order to meet the first stage of the inquiry, must establish not only that the plaintiff has insufficient property to answer costs but also that the defendant has a good defence on the merits and the impugned statements were made in good faith. It would be insufficient to ground an award for security simply on the basis that the plaintiff is not possessed of sufficient assets to pay an award of costs with no consideration of whether the defendant has a good defence.

[107] In my view this interpretation is the one that best balances the competing rights of freedom of expression and of the press with protection of reputation. A plaintiff with a good case will still be allowed to advance that case in order to protect her reputation even if she does not have extant assets to pay the defendants' costs should she lose. On the other hand a defendant with a good defence will not be left without security by a plaintiff who does not have the assets to pay the defendants' costs should she proceed with an action with little merit.

[108] I note two things in passing. The first is that the defendants, if they wish to seek security without proving they have a good defence on the merits, can apply for security under rule 56.01 rather than under section 12 of the LSA. Under rule 56.01 however, a plaintiff who is an individual and is resident in Ontario and who has no outstanding costs awards against him owing to the defendants cannot be made to post security whether or not he has a good claim on the merits. Under the rules it is only a plaintiff who is not ordinarily resident in Ontario, or a plaintiff that is a corporation without sufficient assets in Ontario or a plaintiff who has an outstanding costs award in favour of the defendant or a plaintiff who has another proceeding outstanding for the same relief can be ordered to pay costs. (Under the rules a plaintiff can also be ordered to pay costs if the action is frivolous and vexatious and he has insufficient assets in Ontario to pay costs.)

[109] Secondly, even if I am wrong and the test is disjunctive in that the first stage of the inquiry is met simply by proving the plaintiff has insufficient assets to pay costs, that merely engages the second stage of the enquiry where the court would consider all relevant matters in order to exercise its broad discretion and make such order as is just. As part of the enquiry the court could consider the plaintiff's financial means and the merits of the action and defence.

DOES THE PLAINTIFF HAVE SUFFICIENT ASSETS TO ANSWER AN AWARD OF COSTS?

[110] As I have determined that the test is conjunctive, both parts of the test must be met. The first part of the test – that the plaintiff has insufficient means to pay an award of costs if ordered – has clearly been met. The plaintiff has now given second mortgages on both properties to her lawyers for $500,000 leaving very little if any equity. She is trying to sell the inn. She has not answered the defendants' enquiry whether she has sufficient assets to meet an award of costs. The operation of the inn loses money. Plaintiff's counsel candidly admits that the plaintiff is not possessed of sufficient assets to answer an award of costs.

WHAT DOES "GOOD DEFENCE ON THE MERITS" MEAN?

[111] The second part of the test - that the defendant has a good defence on the merits and the statements complained about were made in good faith – requires the court to determine what is meant by the phrase "good defence on the merits".

[112] In Swain v. Mail Printing Company, a case decided in the late 19th century, Chancellor Boyd determined that the motions judge on a security for costs motion in a libel action "is not to try the merits of the case or to pass upon disputed facts disclosed in conflicting affidavits." He stated that the "materials under oath" used by the defendant "are to be weighed, and if from these it appears there is a good defence on the merits" the statute is satisfied and security should be ordered. He defined "good defence on the merits" as a "prima facie case of justification or privilege – one which ought to succeed if it is not answered or explained away at the trial".[^57]

[113] What did Chancellor Boyd mean? Clearly it means more than a properly pled defence. Evidence is required to substantiate the defence since in his very short reasons the Chancellor stated that the materials under oath of the defendant "are to be weighed" in order to determine if there were a prima facie case. In Swain the defendants' evidence showed that the words complained of were "a fair and accurate report of what occurred in the open court" and as such were sufficient to satisfy the test for security.

[114] I have not been provided with any modern authority that adopts the "prima facie" test set out in Swain, nor have I been directed to any other decision which specifically interprets the meaning of "good defence on the merits" under the LSA. As will be seen however I interpreted that section in one of my own recent decisions which I brought to counsels' attention.

[115] In Elguindy, the words complained of were spoken in the context of court proceedings and "an absolute privilege or immunity attaches to those communications which take place during, incidental to, and in the processing and furtherance of judicial or quasi-judicial proceedings."[^58] As such Quigley J. was able to conclude that the action could not be sustained and that the defendant had a good defence on the merits even without a defence being filed.

[116] The court in Elguindy however stated that the enquiry into whether there is a good defence on the merits is not equivalent to the enquiry that may be made by a trial court:

For these reasons, I agree that the defendants have shown that they have a good defence on the merits. Even so I would note that it is not the practice of the court in applications such as this to enter upon an inquiry equivalent to that of a judge or jury were the matter to proceed to trial. This court "is not to try the merits of the case or to pass upon disputed facts disclosed in conflicting affidavits, but [it] will merely determine whether the applicant has supplied materials sufficient to show a good defence on the merits"[^59]

[117] In motions for security for costs under Rule 56, it has been held that unless the plaintiff is impecunious (where he need only show that the claim is not totally devoid of merit – a standard often described as a very low evidentiary threshold), he must show that the claim has "a good chance of success" and that this warrants "a closer scrutiny of the merits".[^60] This of course deals with a plaintiff showing a "good chance of success" during the second stage of the enquiry to defeat a motion for security, whereas we are concerned with section 12 which deals with a defendant showing a "good defence on the merits" at the first stage of the enquiry. The "good chance of success" has been described as a "high threshold to satisfy the court of its chances of success".[^61]

[118] Further, on motions for security for costs under the Rules, the court "is not required to embark on an analysis such as in a motion for summary judgment."[^62] "If the case is complex or turns on credibility, it is generally not appropriate to make an assessment of the merits at the interlocutory stage. The assessment of the merits should be decisive only where (a) the merits may be properly assessed on an interlocutory application; and (b) success or failure appears obvious".[^63]

[119] There is authority interpreting "good defence on the merits" in a very similar security for costs provision in the [Public Authorities Protection Act][^64]. On an appeal in a security for costs motion, the Divisional Court in Rackley v. Rice stated that the phrase "good defence on the merits" in that Act meant a defence that is "likely to succeed":

He [the motions judge]further held that where s. 14 of the Public Authorities Protection Act refers to a good defence on the merits, it means a defence that is likely to succeed, which is another way of saying the grounds of action are trivial and frivolous. I agree with that statement.[^65]

[120] In Health Genetic Center Corp. v. Reed Business Information Ltd. I adopted the same test for establishing good defence on the merits in section 12 of the LSA. I stated that for a defendant to satisfy the "good defence on the merits" test in section 12 it was not necessary to determine that the defence would succeed at trial, but only that it "is likely to succeed":

To determine if the defendant has a good defence on the merits, it is not necessary to try the merits of the case on disputed evidence nor is an analysis similar to that on a summary judgment motion required. It is not necessary to determine that the defendant will succeed at trial only that it is likely that the defendant will succeed. Further it is only necessary for the defendants to show that any one of their defences is likely to succeed.[^66]

[121] Although there was no analysis in Health Genetic, I agree with the conclusion. In my view, requiring a defendant to show that his defence is "likely to succeed" in order to determine if it has a "good defence on the merits" strikes the appropriate balance between the competing constitutional right to freedom of expression and the legally protected right of an individual to protect his reputation. In my view, for the defendant to demonstrate that it has a "good defence on the merits" means that it must demonstrate that its defence is "more likely than not to succeed".

[122] A plaintiff pursing his right to protect his reputation should not be required to post security for costs simply because the defendant may have a prima facie defence on its own evidence subject to the plaintiff providing an answer at trial. Surely the motions court must also consider the plaintiff's evidence before determining if the defendant has a good defence on the merits. Otherwise a "prima facie case" test sets far too low a standard that has the potential, through a prohibitive security for costs order, to interfere with the plaintiff's right to have a trial court determine if his reputation has been defamed.

[123] On the other hand, it is clear that the court should not engage in either the sort of fact finding that might be done by a trial court or the sort of analysis that would be done on a summary judgment motion. As such the defendant need not establish that his defence will succeed on the merits or that there is no triable issue in the plaintiff's claim. As long as he can prove that one or more of his defences is more likely than not to succeed, that would meet the libel chill of creating a standard that is too high for a defendant to meet in order to have security against the costs it will incur in defending against a weak case.

HAVE THE DEFENDANTS ESTABLISHED THAT THEY HAVE A GOOD DEFENCE ON THE MERITS?

[124] In support of the defendant's assertion that they have a good defence on the merits, the defendants have filed the entirety of the transcript for the 19 day trial, the 183 page written closing submissions of the defendants as presented to the trial judge, a four volume motion record and a compendium breaking down by source the justifications for the various statements complained of and other factual matters with attached relevant documents. The plaintiff has also provided a responding motion record, her closing written submissions to the trial judge and a compendium outlining the source of its various assertions with relevant attached documents. Both parties also filed affidavit evidence, factums and authorities. The motion before me was argued over two full days and a third half day.

The Justification Defence

[125] In support of the defence of justification, the defendants purport to set out proof of the truth of each statement in the article of which the plaintiff complains.

[126] Justification requires proof of the substantial truth of the sting of the defamation and if there is more than one distinct sting from the article the defendant must address the truth of each such sting it its defence. However, for a defence of justification to succeed, the defendant need not prove that each of the words complained of is true, provided that what is left, that is to say the words not proven to be true, do not damage the plaintiff's reputation. In other words are the stings that remain defamatory of the plaintiff?

[127] This has its origin in section 22 of the LSA:

22. In an action for libel or slander for words containing two or more distinct charges against the plaintiff, a defence of justification shall not fail by reason only that the truth of every charge is not proved if the words not proved to be true do not materially injure the plaintiff's reputation having regard to the truth of the remaining charges.

[128] The primary (but not only) stings of which the plaintiff complains are (a) that Kay worked "morning, noon and night" as a "cleaner, servant and handy woman", (b) that Kay was underpaid and (c) that the plaintiff illegally employed Kay, a vulnerable foreign worker.

[129] It is impossible on a motion of this nature to review the mountains of materials presented to me (which included all of the evidence before the trial judge and more); however a review of some of the more salient points demonstrate the difficulty faced by the court on a motion of this nature. The defendants provide evidence that there is some truth to most of the words used, but the plaintiff argues that the sting of the words has not been removed. Of course I am not the trier of fact. My role is not to determine if the defendant might succeed nor is it to determine whether the defendant will succeed. My role is to determine if the defence of justification is more likely than not to succeed.

[130] Is it likely that the defendants can prove the sting of the words that Kay worked "morning, noon and night" as a "servant"? The defendants point to evidence that Kay did the housekeeping and cleaning, did some maintenance and on two or three occasions when Ms. Browne was away, Kay ran the inn "day and night" and took reservations at all hours. The plaintiff on the other hand says that the sting of the words means that Kay worked "too hard" (part of the innuendo alleged of the plaintiff abusing Kay). The plaintiff's argument is that the total hours worked was not excessive, and was less than the 45 hours she was required to work as a nanny, even if some of the hours were in the morning, some in the afternoon and occasionally at night. The evidence is that on most days Kay's work was generally completed after serving breakfast. The plaintiff's evidence is that overall the inn was a quiet place with short busy periods of time but usually there were few guests and often no guests with virtually nothing to do. The guest register shows that for 27 days over the four month course of Kay's employment, there were no guests at the inn. The plaintiff says Kay was not required to take evening calls as there was an answering machine but Kay was often on the phone at night talking to friends and relatives.

[131] The plaintiff provides many more examples of where words in the story suggesting that Kay was overworked and treated like a servant were either incorrect or exaggerated, but it would be a herculean task to describe them in any detail in this endorsement. These facts however do go some distance to meeting the defendants' defence of justification.

[132] Is it likely that the defendants can prove the sting of the words that Kay was "underpaid"? The defendants go through a detailed mathematical exercise of showing that the plaintiff paid Kay $1,000 per month whereas under the contract with Terra Holman she would have earned $1,138.59 (based on an hourly rate over 45 hours). The plaintiff says that the calculations do not account for room and board (although the defendant argues she got room and board at both jobs) and no credit was given for Kay being paid for work she did for other employers during her designated work days. The plaintiff also says that that there is no proof that Kay worked more hours at the inn than the 45 hours she would have worked as Ms. Holman's nanny.

[133] Is it likely that the defendants can prove the sting, by innuendo or otherwise, that Ms. Browne illegally employed Kay? The defendant clearly demonstrates that to work in Canada a foreign worker requires a positive labour market opinion ("LMO") in order to obtain a work permit for a specific job with a specific contract – in this case to work as a nanny for Terra Holman. It is also clear that Kay was committing an illegal act by working for the plaintiff for which she did not have a work permit. Does that mean that the plaintiff was knowingly committing an illegal act? The defendants proffer two excerpts from the trial transcripts to demonstrate that the plaintiff knew she was illegally hiring Kay. In one, when Lloyd Tait (the principal of the Jinkhom Agency that brought Kay to Canada) visited the plaintiff on an occasion after Kay had started to work for the plaintiff, he told the plaintiff that he (Tait) would have to apply for a new LMO for Kay to be able to work for the plaintiff, to change from Ms. Holman to the plaintiff. To me the implication from that excerpt was that Shirley expected that Tait was going to take care of getting a new permit. In the other excerpt the plaintiff recognized that she made a mistake hiring Kay, "but at the time, I felt I was doing something good" and that she has learned to be more thorough at following up on things and being more investigative. This was an admission in retrospect that she made a mistake. The plaintiff also argues that the defendants have not established that the plaintiff failed to do her due diligence to ensure that Kay was employed in a manner consistent with the legislation.

[134] Although the words in the article that Kay wonders if Ms. Holman and her son "really exist" were not words complained of in the statement of claim, the plaintiff suggests that the sting is the innuendo that Ms. Holman in fact does not exists and that Ms. Browne was party to inventing a non-existent employer – part of the suggestion that the plaintiff committed immigration fraud - an illegal act. In their statement of defence, the defendants plead that a fact in support of the truth of the illegality statements was that Ms. Holman was nowhere to be found. Although Ms. Holman never surfaced to give Kay the job she contracted to give her and the plaintiff was unable to bring Ms. Holman forward as a witness at trial, the evidence from the plaintiff is that she does exist and that they could not convince her to return to Canada because she was living in the U.S. without a green card. However the burden is on the defendants to prove the illegal act.

[135] In my view the defendants' evidence does not establish the likelihood that the plaintiff was knowingly committing an illegal act or abusing either the foreign worker program or Kay. A trial court hearing the oral testimony of the witnesses may however find otherwise.

[136] These are but a few examples of evidence proffered by the defendant to demonstrate the truth of the words complained of.

[137] The difficulty is compounded because so much depends on the credibility of the two persons with the most knowledge of the truth – Shirley Browne and Kay Manuel.

[138] The defendants provide examples of inconsistencies in the plaintiff's evidence. One example is in direct evidence the plaintiff says she kept asking Kay about her S.I.N. but in cross-examination admits she perhaps asked only once (or at least thought she did) and at other times asked about papers to be filled out. In the other she had said she completed two years of a Ph.D. program when in fact she had not completed two years because, although registered, she learned she was deregistered when she had to return to Guyana. The defendant purports to provide examples of the plaintiff's untrustworthiness. She was charged with obstructing justice by giving her sister's name as her own when stopped for speeding and she did not have a driver's licence and again when a police officer came to serve papers on her arising out of that incident. There is some reference to the plaintiff not being a psychotherapist although she had planned to open up an office as one.

[139] The plaintiff also proffers evidence attacking Kay's credibility with a tendency to exaggerate and embellish facts particularly regarding issues of the intensity and quantity of work and the demands of the job. The plaintiff is a woman of a colour from Guyana. There is some evidence of racial prejudice by Kay against persons of colour, particularly in her remarks of preferring "Canadian or American" employers in an email, which she later explained as meaning "white" employers.

[140] What is particularly telling is when I asked defendants' counsel why, given that he had all of the trial evidence as well as written submissions made to the trial judge, he did not move for summary judgment instead of agreeing to a new trial, he answered "because there are credibility issues."

[141] I agree with the plaintiff that the determination of whether the defendants have a good defence on the merits, particularly the defence of justification, depends on interlocking findings of facts and credibility which cannot be determined on a motion for security for costs. To make such findings requires a rehearing before a trial judge who can hear oral evidence, assess the credibility of the witnesses and make findings on the merits of the defence on a totality of the evidence.

[142] This case is the polar opposite of what was before the motions judge in Elguindy, where Quigley J. was able to conclude there was a good defence on the merits even before a defence was filed since there was obviously a good defence of absolute privilege, the words having been spoken during and in furtherance to judicial proceedings.

[143] I am unable to conclude on the conflicting evidence before me that the defendants have a good defence of justification on the merits. I can no more say that the defence is more likely to succeed as not than I am able to say that the plaintiff's claim is more likely to succeed than not.

The Defence of Fair Comment

[144] The defence of fair comment requires the defendants to establish that the statements were made on a matter of public interest, were based on fact, were recognized as comment or opinion, though it may include inferences of fact and that a person could honestly express that opinion based on the proven facts.[^67]

[145] It is admitted that the article was part of a series on the exploitation of foreign workers and was a matter of public interest, although the plaintiff maintains that any exploitation was by the Agency and possibly Ms. Holman, but not by the plaintiff who took Kay in when Ms. Holman disappeared. The plaintiff argues that the defendants were wrong to focus on her rather than the real villains, but this does not detract from the article being on a matter of public interest.

[146] In paragraph 9 of the statement of defence, the defendants plead that if the words complained of mean that the plaintiff behaved illegally or abusively to Kay, those statements as well as the statement that Kay was underpaid are substantially true "and to the extent that they are expressions of opinion they are opinions that a person could honestly hold based on the facts set out in the Article, and are fair comment on matters of public interest..." That is the only reference to fair comment in the statement of defence.

[147] Whether the comments were based on facts proven to be substantially true is part of the same problem that the defendants face in their justification defence. Whether the words used were facts or comment on proven facts, the onus remains on the defendants to prove the substantial truth of the statements.

[148] In any event, in their factum the only statement referenced by the defendants as comment is the remark by Kay expressing doubt whether Ms. Holman and her son exist.[^68] To that the defendants argue the statement was objectively capable of being honestly believed and were in fact sincerely believed "by those who made them".

[149] The actual words in the article are: "Brent and his mother never surfaced. Today, four months after she arrived in Canada, Manuel wonders if they really exist." I have read the interview between the reporter, Dale Brazao and Kay Manuel. Much of it reads as Brazao putting words in Kay's mouth and that is particularly evident respecting the above quote. Brazao had been talking about the illegality of Tait charging for a placement fee and then putting Kay in a place where the owner apparently doesn't exist. The interview continues:

Dale Brazao: And I have gone, I have gone to the house where she was supposed to live, nobody knows her there...I have phoned these two numbers, nobody knows her there...

Kay Manuel: Exactly.

Dale Brazao: You don't even know if Terra exists...

Kay Manuel: Oh boy...

Dale Brazao: Right?

Kay Manuel: What about the signature of Terra Holman...

Dale Brazao: Well, you see, Danya could have done that...

[150] Of course I have not heard any of the witnesses give testimony, but it is clear from this excerpt of the interview that Kay never said that she wondered if Terra Holman really existed. It may be reporter Brazao's view that perhaps Holman never existed but he has attributed the words to Kay. That Brazao might honestly believe Terra Holman did not exist is no excuse for blatantly misleading the reader into believing that it was a comment (let alone a fair comment) by Kay. I agree with the plaintiff that this could be seen as a classic case of a reporter putting words into the mouth of a subject in pursuit of a story. Although the test is whether anyone could honestly hold the belief, the belief must be based on proven fact and in my view the defendants have not established that there is a factual basis for the comment.

[151] I am unable to conclude on the evidence highlighted to me that the defendants have a good defence of fair comment on the merits. That is not to say that the trial court hearing all the evidence might not agree that it is fair comment but at this stage the defendants have not satisfied me that the defence of fair comment is more likely than not to succeed.

The Defence of Responsible Journalism

[152] The final defence put forward is the new defence of responsible journalism. Under this defence, the publication must be on a matter of public interest and the defendants must have been "responsible, in that he or she was diligent in trying to verify the allegation(s), having regard to all the relevant circumstances."[^69] Factors potentially relevant to this analysis include the seriousness of the allegation; the public importance of the matter; the urgency of the matter; the status and reliability of the source; whether the plaintiff's side of the story was sought and accurately reported; whether inclusion of the defamatory statement was justifiable; and whether the public interest in the story lies in the fact that the statements were made, rather than whether they are true.[^70]

[153] There is no doubt that the article dealt with a matter of public interest and that the allegations were serious. On the issue of whether inclusion of the defamatory statements were justifiable, there is some question whether it was justifiable to publish this attack on Shirley Browne to highlight the treatment of foreign workers in Canada. This is particularly so when the real object of the story could be seen to be the Agency and not Ms. Browne. In fact, Kay's complaint was primarily about the Agency and not Shirley Browne.

[154] On the issue of status and reliability of the source, Kay's reliability depends on her credibility, which is in issue. Brazao did interview Kay, Lloyd Tait and a neighbour who was supportive of Kay. He attempted to find Terra Holman. The plaintiff points to other trial evidence to prove the existence of Terra Holman but I cannot conclude that Brazao would have been aware of that evidence at the time he wrote the article. Whether he worked diligently to confirm the story and corroborate facts is not a conclusion I am able to draw on this motion and requires a full appreciation of all the evidence and an evaluation of the credibility of Brazao, Kay and the plaintiff at trial.

[155] On the issue of seeking and reporting on the plaintiff's side of the story, while Brazao did seek to obtain the plaintiff's side of the story I cannot accept on the evidence before me that he reported the plaintiff's story and the points of disagreement accurately. I have read Brazao's interview with the plaintiff. He did not report that Shirley said to Brazao: "In my view she was quite happy here." "She told me she did not want to leave." Kay finally left because "somebody else offered her a job with more money." I have "never been unfair to anybody. Paid everybody." None of this side of the story stated by the plaintiff appeared in the article. Instead, Brazao reported that the plaintiff first explained that Terra Holman was her sister, was out of the country and asked her to look after Kay while she was gone but "in the span of a three-minute interview, Bollers went from referring to Holman as her sister, to "half sister" to "we may not be be blood relatives but we call each other sisters." Actually those words were stated in the course of two sentences and Brazao failed to mention that Shirley's mother raised Terra along with Shirley in the same home and so they call themselves sisters. Brazao makes it sound like the plaintiff was deliberately lying. In any event the real mischief was failing to include the plaintiff's side of the story.

[156] While this relates more to the requirement to prove good faith (to be discussed later in this endorsement) it should also be pointed out that after the article was published, Mr. Flaherty wrote a rebuttal to the Star to point out in more detail the other side of the story, but the Star refused to publish it or do a follow up article because they were of the view it contained some falsehoods. They did invite Flaherty to write a letter to the editor, which he did, but the Star heavily redacted the letter to the editor before publication.

[157] On all of these matters, the court will also be called upon to determine whether the Star's editorial judgment was responsibly exercised. That I am unable to do on the evidence before me.

[158] I am unable to conclude on the evidence presented to me that the defendants have a good defence of responsible journalism on the merits, particularly on the issue of telling all sides of the story. It will require a trial court to hear all of the evidence and make findings of credibility to determine if this defence can be maintained and in particular to decide whether the failure to report Ms. Browne's comments during the interview that were not supportive of Brazao's story and the refusal to print the rebuttal are fatal to the defence of responsible journalism.

WAS THE ARTICLE WRITTEN IN GOOD FAITH?

[159] Even if the defendants are able to demonstrate that they have a good defence on the merits, section 12 requires the defendants to show both "that the defendant has a good defence on the merits and that the statements complained of were made in good faith".

[160] Was the article written in good faith? The plaintiff submits that there is no definition of "good faith" in the case law for section 12 nor have the defendants submitted any such case law. It appears from the submissions of both parties that there is a relationship between the defence of responsible journalism and satisfying the requirement that the statements were made in good faith. In my view it must include the requirement that the defendants honestly believed that the statements they were publishing were true, but that is not enough.

[161] The plaintiff asserts and I accept that the defendants cannot be the sole arbiter of their own good faith – it is up to the trial court in examining "the facts surrounding the publication" to determine if the defendants acted in good faith. Furthermore:

Different individuals may have different standards of "good faith," and to accept the defendant's own statement of his bona fides would be to make him a judge in his own case.[^71]

[162] I also accept the plaintiff's submission that good faith must include a requirement to fairly "tell both sides of the story".

[163] The defendants state in their notice of motion that they published the article in good faith and that this is demonstrated by acting responsibly in publishing the article, honestly believing all statements of fact in the article to be true and by honestly believing that a person could hold the statements of opinion based on substantially true facts. In their factum they add that their good faith is also shown by their "careful consideration" of Flaherty's rebuttal (which they then refused to publish because they claimed it contained several false statements) and by publishing Flaherty's letter to the editor (which they unilaterally redacted). They add that there is no evidence that the defendants acted with malice.

[164] Whether Brazao honestly believed everything he was writing will be a matter for the trial court to determine after examining all steps taken by Brazao to confirm the truth and by assessing Brazao's credibility after hearing his and others' oral testimony. I am unable to make that determination on the written record before me. I do however note my earlier reference to Brazao reporting that Kay wondered if Terra Holman really existed when the transcript of the interview show that it was Brazao that queried her existence.

[165] I also note that the Star's Public Editor, Kathy English, testified at trial that after reviewing both sides of the story she was unable to determine which version was correct.

[166] In terms of telling both sides of the story, I have earlier noted that Brazao failed to include in the article the plaintiff's side of the story given to him during their interview – that Kay was treated fairly and was happy at the inn. Instead Brazao highlighted the plaintiff's use of the word "sister" for Terra, when she was not her blood sister but rather someone whom her mother raised together with Shirley.

[167] Then there is the issue of the Flaherty rebuttal after the story was published. Brazao at first stated at trial that the plaintiff and Flaherty "were seeking a correction. I don't do corrections". He then admitted however that "in some circumstances it may be my obligation as a reporter to reinvestigate, to look at things, even after the original story is published". The Star would not publish the rebuttal claiming that in their view parts of the rebuttal were untrue.

[168] This appears to be somewhat at odds with the Star's own policies. A Star editorial published in November 2013 about Mayor Rob Ford, stated that it was part of the Star's own standards to publish both sides of a story whether or not the Star believes each side is telling the truth.

[169] While there is of course a right to editorial discretion, it will require a trial court to consider all of the evidence and determine whether the refusal to print the rebuttal or any portion of it was done in good faith. The same holds true for the substantial redactions it made before publishing Flaherty's letter to the editor. It appears to be an unsettled issue in the jurisprudence whether there is an obligation, as part of telling both sides of a story, to publish a post-publication response.

[170] I am not satisfied on the written record before me that the defendants have established that the article was published in good faith. That must be an issue for the trial judge. As such the ground for security would fail even I were otherwise satisfied that one of the defendants' defences would likely succeed.

WHAT ORDER IS JUST IN ALL THE CIRCUMSTANCES?

[171] Since I have determined that the defendants have failed to meet the second branch of the conjunctive test, to show that they have a good defence on the merits and that the statements complained of were made in good faith, they have failed to meet the requirements of the first stage of the enquiry. Having failed to meet that requirement, the motion for security for costs must fail and it is unnecessary to embark on the second stage of the inquiry and determine what order is just in all the circumstances.

[172] In case I am wrong and the defendants have met the first stage of the inquiry either because:

(a) the test is disjunctive not conjunctive and the defendants have established one of the alternate basis for security, that the plaintiff is not possessed of sufficient assets to answer a costs award, or

(b) the defendants have established a good defence on the merits, whether the test is conjunctive or disjunctive

then for the sake of completeness I will embark on the second stage of the enquiry and determine what order would have been just in all the circumstances. As noted, the court has a broad discretion and should consider all relevant circumstances in determining what order is just.

Would an Order for Security Have Been Just?

[173] One of the considerations in the determination of what is just is the merits of the case. Although the parties have provided me with the transcripts of 19 days of evidence as well as extensive oral and written submissions, I am unable to conclude within the confines of this motion whether the defendants have a good defence on the merits that is likely to succeed or conversely whether the plaintiff has a good case on the merits that is likely to succeed. Merits are a neutral consideration at this stage of the enquiry.

[174] Another consideration in the determination of what is just is the financial means of the plaintiff. While clearly she has little or no equity in her properties and is unable to demonstrate that she has sufficient exigible assets to meet an adverse costs award, and while her income from the operation of the inn is meagre, that is not the same as saying she would be unable to post security for costs if ordered. Ms. Browne did not file an affidavit on this motion. She has not said she is impecunious. She has not said that she would be unable to pay costs or security for those costs although it would not have been difficult for her to have said so if that were the case. It is unknown whether she could borrow or otherwise obtain monies to post security, for example from Mr. Flaherty. Flaherty's income and assets are unknown to the court but within the knowledge of the plaintiff. Ms. Browne has not stated that the action would come to an end if she were ordered to post security in any amount. In my view the plaintiff's financial means is also a neutral factor.

[175] In my view it is unnecessary to consider the defendants' allegation that the conduct of the plaintiffs caused unnecessary costs to be incurred during the course of litigation leading up to the first trial in determining what order would be just. Without commenting on whether any of those costs actually were caused by unreasonable behaviour, they would only affect the quantum of costs and not the determination of whether to retroactively award security for those costs. It is best left to the trial judge to determine whether the conduct was unreasonable and should be sanctioned by costs. In any event, as will be seen, I would not award security for the costs already incurred for the first trial.

[176] What does come into play in determining such order as is just is the timing of the request for security. No security was demanded during the four and a half years that this action progressed or at any time prior to the first trial. While security for costs can be requested at any time, they should normally be sought at the earliest time when the defendants become aware of the circumstances that would entitle them to costs:

Where a defendant believes that he is entitled to an order for security for costs, he should move at the earliest possible moment in order that the plaintiff may know whether or not he will be required to give security and to prevent him from proceeding at very considerable expense down to trial and then find himself faced with an order for security with which he is unable to comply.[^72]

[177] If earlier security had been demanded, before Ms. Browne had invested so many years and so much in legal costs in this action, she would have been able to consider whether, if necessary to post security, she would want to proceed with the action.

[178] Further, if the trial judge had not passed away and had rendered her decision, even if the decision were in favour of the defendants and an adverse costs award made, the defendants would have been stuck with the state of Ms. Browne's exigible assets and would have faced the possibility of having an unenforceable judgment for costs.

[179] It would not be just to permit one party to benefit from the untimely death of the trial judge. The parties should be in the same position as if the trial judge had survived to give judgment in the action, the trial having been completed and judgment under reserve.

[180] On the other hand, defendants cannot be faulted for seeking security later in the litigation when they only had reason to become concerned about the sufficiency of the plaintiff's assets at that late stage.[^73]

[181] Three months before the first trial the defendants had done a title search and it appeared that there was equity in Ms. Browne's properties subject only to a conventional first mortgage on each. Unfortunately for the defendants, their title search was conducted a month too soon as they did not discover that the plaintiff had given a $500,000 mortgage on both parcels of land to her lawyers, presumably to secure their legal fees, two months before the start of the trial. They did not discover this until after the first trial. The defendants received information about the plaintiff's income level (her tax returns) and the inn's profitability (the financial statements), both of which indicated a low level of income, only on the eve of trial. Finally they learned that the inn was listed for sale only after the completion of the first trial.

[182] In my view that is an equitable factor favouring the awarding of security notwithstanding the lateness of the request, although it would affect the quantum of security ordered. I say this notwithstanding the absolute right of the plaintiff's lawyers to be paid for their representation and to be given security for their legal fees if such security is available. That in my view is a tenet of access to the courts, which is also a principle to be fostered. I must bear in mind however that the plaintiff's lawyers have their security to the detriment of the defendants.

[183] On the other hand I place no weight whatsoever on the defendants' explanation that it was only after the first trial that they recognized the strength of their case (in fact the evidence at trial both helped and hurt both parties and the credibility of the key witnesses for both sides). I also place little or no weight to the argument that security was necessary because of the plaintiff's unreasonable litigation behaviour.

[184] I also recognize that the awarding of security for costs in a libel action should attempt to balance the newspaper's constitutional right to protect its freedom of expression and freedom of the press from the chilling effect of libel charges against the plaintiff's recognized right to protect her reputation and to bring a defamation action to that end.

[185] In my view, had the defendants met the first stage of the enquiry, I would have determined that the order that would have been the most just would be to award security to the defendants only for their reasonable prospective costs of a second trial with proper staging of payments. The defendants should not have security for past costs, since those are costs that the defendants would have had to live with had the trial judge not passed away prior to rendering her decision. In my view that balances the competing interests of the parties and the competing constitutional principles.

What Quantum of Security Would Have Been Ordered?

[186] In examining the defendants' bill of costs for the prospective proceeding, I would exclude the costs of the current motion and concentrate only on the costs of the second trial. They claim their costs for preparing for the second trial will be $169,255 or 2/3 of the cost they incurred in preparation for the first trial. In my view the savings would be much more substantial. There will be no need to conduct the same legal research or prepare new books of documents (as opposed to recopying them). Preparing their witnesses will be less costly as will their own preparation for examination and cross-examination of witnesses. I would not award security for more than 40% of the preparation costs for the first trial, without prejudice to the actual costs as may be fixed by the trial judge or assessed by an assessment officer. That amount would be $102,586. The defendants suggest that security for 16 days of trial, including submissions in the partial indemnity sum of $32,000, would be appropriate, but concede it could be completed in 14 days. The plaintiff points out that of the 19 days of trial and 2 days of submissions for the first trial many of the days were a half day or less and the full day equivalent of the first trial was 15 ¼ days. No-one has suggested that fewer witnesses would be called. Given the availability of the transcripts of the first trial, examination and cross-examination should now be more focussed. I accept a 14 day trial estimate which would result in partial indemnity costs of $28,000. I would deduct from the disbursements attracting security the transcript of the first trial for total disbursements of $4,762. The total with HST is $152,885.

[187] That however is not the end of the enquiry into what is just. The partial indemnity costs of $152,885 include partial indemnity for the costs of three lawyers at both the preparation and trial stages as well as the time of two students. While I commend the Cadillac treatment that the Star is receiving from its lawyers, it should not be on the back of the plaintiff, particularly at the security stage. I am of the view that it would not be just to require the plaintiff to pay security for the anticipated costs of three lawyers throughout the proceeding. I am further of the view that there is bound to be some duplication of services of the work done by the more junior lawyers and review by the senior lawyer. There is broad discretion to make such order is just. In my view, fair and reasonable prospective costs to secure would have been the sum of $120,000.

[188] Proper staging would have been to pay 50% of those costs within 30 days after a new trial date is set and 50% at least 30 days prior to the date scheduled for the start of the second trial.

[189] I would add that had it been offered, I would have considered security by way of a second mortgage on the properties in favour of the Accountant of the Superior Court rather than cash. That would have required the plaintiff's lawyers to postpone their own mortgage in favour of the mortgage to the Accountant. I recognize however that it would be unfair both to the lawyers and to the plaintiff to make such request considering the effect on access to justice if the plaintiff were deprived of meaningful legal representation by such order.

SUMMARY OF CONCLUSIONS

[190] In summary I have concluded as follows:

(a) The test under section 12 of the LSA is a conjunctive test requiring the defendants to demonstrate not only that the plaintiff is not possessed of property sufficient to answer the costs of the action but also that the defendants have a good defence on the merits and that the statements complained of were made in good faith.

(b) To demonstrate a good defence on the merits, the defendants must satisfy the court that it is more likely than not that one of their defences will succeed at trial.

(c) The defendants have satisfied the first part of the conjunctive test – that the plaintiff has insufficient property to answer an adverse award of costs.

(d) The defendants have not satisfied the second part of the conjunctive test - that the defendants have a good defence on the merits and that the statements complained of were made in good faith.

(e) Being unable to satisfy both parts of the conjunctive test, it is unnecessary to embark on the second stage of the enquiry to determine what order is just. The motion for security for costs is to be dismissed.

(f) If I were in error and it were necessary to embark on the second stage of the enquiry either because the test is disjunctive and it was satisfied solely by proving that the plaintiff had insufficient assets to meet an adverse costs award or because the defendants did demonstrate a good defence on the merits and the statements were made in good faith (whether the test is conjunctive or disjunctive) then security would have been ordered in the sum of $120,000. The security would have been payable 50% within 30 days after setting a second trial date and 50% at least 30 days before the date scheduled for the start of the second trial.

ORDER

[191] The motion by the defendants for security for costs is dismissed.

COSTS OF MOTION FOR SECURITY FOR COSTS

[192] If the parties are unable to agree on costs of this motion I am prepared to receive brief costs submissions from the plaintiff, together with a costs outline (Form 57B) and redacted dockets within 14 days of release of these reasons and brief responding submissions from the

defendants within a further 10 days.

Master R. Dash

DATE: April 21, 2015

[^1]: Khan v. Metroland Printing, Publishing & Distributing Ltd., 2005 14941 (ON CA), [2005] O.J. No. 1787, 75 O.R. (3d) 165 (C.A.) at paragraphs 14 and 28

[^2]: Khan v. Metroland, supra, at para.32.

[^3]: Khan v. Metroland, supra, at para. 26

[^4]: Zeitoun v. Economical Insurance Group, 2008 20996 (ON SCDC), [2008] O.J. No. 1771, 91 O.R. (3d) 131, 53 C.P.C. (6th) 308 (Div. Ct.), affirmed 2009 ONCA 415, [2009] O.J. No. 2003, 96 O.R. (3d) 639, 73 C.P.C. (6th) 8 (C.A.) at Div. Ct. para. 44

[^5]: Stojanovic v. Bulut, 2011 ONSC 874, 2011 O.J. No. 840 (SCJ – Master), affirmed 2011 ONSC 4632, [2011] O.J. No. 3543 (SCJ) at para.5

[^6]: Zeitoun v. Economical Insurance Group, supra, at Div. Ct. paras. 45, 49 and 50.

[^7]: Section 18 of the LSA deals with security for costs in a slander action, but is similar to section 12 dealing with security for costs in a libel action, although there are some differences.

[^8]: Parent v. Campbell, 2014 ONSC 879, [2014] O.J. No. 633 (SCJ – Master) at para. 32

[^9]: Parent v. Campbell, supra, at para. 36

[^10]: Parent v. Campbell, supra, at para. 33

[^11]: Parent v. Campbell, supra, at para. 36

[^12]: Robinson v. Mills, [1909] O.J. No. 116, 19 O.L.R. 162 (H.C.J.) at para. 37

[^13]: An Act Respecting the Law of Libel, S.O. 1987 c. 9, sec. 4

[^14]: An Act Respecting Actions for Libel and Slander, S.O. 1909 c. 40, sec. 12

[^15]: The Libel and Slander Act, 1958, S.O. 1958 c. 51, sec. 13

[^16]: Oshanek v. Toronto Daily Star, 1965 260 (ON SC), [1966] 1 O.R. 492 (H.C.J.. – Master)

[^17]: Hill v. Creed Furs Ltd., (1972), 3 O.R. 825 (H.C.J. – Master) at p. 826-7

[^18]: Nikolic v. Northern Life Publishing Co., [1976] O.J. No. 1436 (H.C.J.) at para. 6 and 7

[^19]: Gunn v. North York Public Library, (1977), 1976 764 (ON SC), 14 O.R. (2d) 554, 1976 O.R. 2351 (H.C.J.) at paras. 6 and 7

[^20]: Howard-Azzeh v. St. Catherines Standard Group Inc., 2003 20970, 179 O.A.C. 133 (Div.Ct.) at para. 12

[^21]: Khan v. Metroland Printing, Publishing & Distributing Ltd., 2005 14941 (ON CA), [2005] O.J. No. 1787, 75 O.R. (3d) 165 (C.A.)

[^22]: Khan v. Metroland, supra, at para. 14

[^23]: Khan v. Metroland, supra, at para. 13

[^24]: Khan v. Metroland, supra, at para. 34 and thereafter the analysis under rule 59.06 at paragraphs 35 to48.

[^25]: Khan v. Metroland, supra, at para. 29

[^26]: Khan v. Metroland, supra, at para. 1

[^27]: Van Riessen v. Canada (Attorney General) (1994), 35 C.P.C. (3rd) 165 (OCGD)

[^28]: Khan v. Metroland, supra, at para. 18

[^29]: Elguindy v. Koren, [2008] O.J. No. 764 (S.C.J.)

[^30]: Elguindy, supra, at para. 60

[^31]: Elguindy, supra, at para. 31

[^32]: Elguindy, supra, at para. 25

[^33]: Elguindy, supra, at para.36

[^34]: Elguindy, supra, at para. 37

[^35]: Parent v. Campbell, 2014 ONSC 879, [2014] O.J. No. 633 (SCJ – Master)

[^36]: Parent, supra, at paras. 13 and 14

[^37]: Parent, supra, at para. 31

[^38]: Parent, supra, at para. 35

[^39]: Health Genetic Center Corp. v. Reed Business Information Ltd., 2014 ONSC 6449, [2014] O.J. No. 5395 (SCJ-Master)

[^40]: Health Genetic Center Corp., supra, at para. 27

[^41]: Constitution Act 1982, Part I, Canadian Charter of Rights and Freedoms, section 2(b)

[^42]: Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130, [1995] S.C.J. No. 64 (S.C.C.)

[^43]: Hill v. Church of Scientology of Toronto, supra, at para. 107

[^44]: Hill v. Church of Scientology of Toronto, supra, at para. 107

[^45]: Hill v. Church of Scientology of Toronto, supra, at para.108

[^46]: Hill v. Church of Scientology of Toronto, supra, at para.121

[^47]: Hill v. Church of Scientology of Toronto, supra, at para.100

[^48]: Hill v. Church of Scientology of Toronto, supra, at para.121

[^49]: Grant v. Torstar Corp., 2009 SCC 61 (S.C.C.)

[^50]: Grant v. Torstar Corp., supra, at para. 7

[^51]: Grant v. Torstar Corp., supra, at para. 6 and 2

[^52]: Grant v. Torstar Corp., supra, at para.1

[^53]: Grant v. Torstar Corp., supra, at para.3

[^54]: Khan v. Metroland, supra, at para. 29

[^55]: See for example R. v. Henry, [2005] S.C.R. 609 at para. 25

[^56]: Elguindy, supra, at para.25

[^57]: Swain v. Mail Printing Company, [1894] O.J. No. 272 (H.C.J. – Practice Court) at para.10.

[^58]: Elguindy, supra, at para. 36

[^59]: Elguindy, supra, at para. 37

[^60]: Zetouin, supra, at para. 50

[^61]: Coastline Corp. v. Canaccord Capital Corp., 2009 21758 (ON SC), [2009] O.J. No. 1790 (SCJ – Master) at para. 7(iv)(c)

[^62]: Coastline Corp, supra, at para. 7(vi).

[^63]: Coastline Corp, supra, at para. 7(vii)

[^64]: Public Authorities Protection Act, R.S.O. 1990, c. P.38, section 14

[^65]: Rackley v. Rice, 1992 7717 (ON SC), [1992] O.J. No. 253, 8 O.R. (3d) 105 (Div. Ct.) at para. 15

[^66]: Health Genetic Center Corp. v. Reed Business Information Ltd., supra, at para. 39

[^67]: WIC Radio v. Simpson, 2008 SCC 40, [2008] 2 S.C.R. 420 (S.C.C.) at paras. 28-30

[^68]: Some of the Star's witnesses even suggested that the primary focus of their investigation was the existence of Terra Holman.

[^69]: Grant v. Torstar Corp., supra, at para. 98

[^70]: Grant v. Torstar Corp., supra, at paras. 110-121

[^71]: Greenhow v. Wesley (1910), 1 O.W.N. 1001 (H.C.J. – Master) at para. 5.

[^72]: Charron v. MacDonald, 1938 352 (ON SC), [1938] O.W.N. 410, [1938] 4 D.L.R. 768 (H.C.J. – Master)

[^73]: Corporate Building Services Inc. v. Cutler, [2009] O.J. No. 6095 (SCJ – Master) at para.12