Court File and Parties

COURT FILE NO.: CV-19-628651 DATE: 20210427 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Hui Huang Hoe AND: Dazhi Ren, Xinyi (Wendy) Tian, and Bitao Yan

BEFORE: J.T. Akbarali J.

COUNSEL: Alina Sklar, for the Plaintiff/Appellant Paul Starkman and Calvin Zhang, for the Defendants/Respondents

HEARD: April 26, 2021

Endorsement

Overview of the Appeal

[1] The plaintiff/appellant appeals from the decision of Master Josefo, dated January 20, 2021, in which he ordered the plaintiff to post $20,000 in security for costs. The plaintiff argues that the Master made errors of law and palpable and overriding errors of fact in concluding that the plaintiff was not ordinarily resident in Ontario, and in finding that an order for security for costs was just.

[2] Although the Notice of Appeal advances a number of grounds, these can be distilled to the following:

a. The Master made palpable and overriding errors of fact by misapprehending the evidence to conclude that the plaintiff is not ordinarily resident in Ontario. In particular, the Master failed to properly consider the plaintiff’s permanent residency status in Canada;

b. The Master erred in law by failing to consider the merits of the plaintiff’s action when determining that it was just that an order for security for costs be granted.

[3] There is no dispute that questions of law are reviewed on a correctness standard, while determinations of fact are entitled to deference, and will only be set aside if they amount to palpable and overriding error (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8 and 10).

[4] Equally, there is no dispute that when making an order for security for costs under r. 56.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the moving party must establish that the plaintiff is ordinarily resident outside of Ontario, and that an order for security for costs is just.

[5] There is no allegation that the Master misdirected himself with respect to the relevant law. Rather, the plaintiff argues that the Master made a palpable and overriding error of fact by not considering his permanent residency status in Canada, and that the Master failed to apply the relevant law to the facts when determining that it was just to make an order for security for costs.

[6] For the reasons that follow, I conclude that the appeal must be dismissed.

Did the Master make a palpable and overriding error of fact in concluding that the plaintiff was not ordinarily resident in Ontario?

[7] The Master reviewed the evidence regarding the plaintiff’s ties to Ontario. Among other things, he noted the plaintiff’s status as a citizen of Malaysia and a permanent resident of Canada, his history as a student at the University of Toronto, and that he has a rented room in Toronto. He also reviewed the time the plaintiff has spent in Ontario since January 2019, and found it to be limited and sporadic.

[8] The Master noted the plaintiff’s statement of claim refers to the plaintiff residing in Ontario “while at school,” and that the plaintiff is no longer at school. The plaintiff argues that in his pleading, he was only intending to avert to the possibility that his address for service in Ontario might change. I have difficulty with this explanation, given that the plaintiff was and is represented by counsel. The Master made no error in considering the plaintiff’s pleading. Moreover, to the extent the plaintiff argues that he is only no longer a student due to the actions of the defendants, the record suggests he was not accepted for a Ph.D. program at the University of Toronto because he twice failed his qualifying examinations.

[9] The Master found that the plaintiff most recently returned to Ontario from Malaysia with a return airline ticket to Malaysia, and inferred that the plaintiff intended to soon return to Malaysia after purchasing the ticket. Although the plaintiff disputed this on cross-examination, his evidence on the point shifted. He first said the return ticket was purchased because it was cheaper than a one-way ticket, then stated it was a mistake, then stated that his father wanted him to return to Malaysia for Chinese New Year. There was evidence on the record to allow the Master to make the inference that the plaintiff intended to return to Malaysia.

[10] The Master noted that the plaintiff has no personal ties to Ontario in that he has no relatives in Ontario, he is unmarried, he has no children, and he lives alone. He owns no property, nor does he have a successful ongoing business in Ontario. He has no employment and earns no income in Ontario. Although the plaintiff points to a company he incorporated in Ontario, the evidence in the record indicates that the company is not carrying on significant business. It billed a total of $400 in 2020, which was paid to a Malaysian company rather than the Ontario company. The Master noted that the company has not operated since March 2020, and that there was no reliable evidence in the record to support the plaintiff’s assertion that the plaintiff could not have been operating the business or earning income notwithstanding the pandemic.

[11] It also appears that the plaintiff reported earning $22,000 from the Ontario company on his tax returns, and claimed and received CERB payments as a result, when the $22,000 was in fact money given to him by his family in Malaysia, and the CERB was claimed while he was physically in Malaysia. The Master found that, in exercising his discretion, he was entitled to consider this conduct of the plaintiff in evaluating the defendants’ concern whether there would be sufficient assets available or exigible in Ontario to pay their costs if they are successful in the litigation.

[12] The Master also noted that the Ontario company’s registered address is the address of Ryerson University’s Zone Learning Program, in which the plaintiff was registered. The Master described the program as a business “incubator” open to most anyone to register, to help mentor, foster, and assist start-ups. He noted that the plaintiff’s involvement in the Zone Learning Program (which is proceeding online only due to the pandemic) is scheduled to end later this year. The Master found that the fact that Ryerson’s address is used for the plaintiff’s company does not imply stability, or assets in the company. The Master concluded that the plaintiff owns no property or assets in Ontario, but receives financial support from his family abroad.

[13] The Master concluded that the plaintiff was likely in Ontario for purposes of the security for costs motion. The Master also found that the plaintiff is likely obliged to return to Malaysia to meet his obligation under a government scholarship program from which he benefited. The plaintiff argues the Master incorrectly interpreted the requirements of the scholarship program. In my view, the evidence does not support a conclusion that the Master made a palpable error in this regard, and even if it did, any such error would not be overriding in view of the multitude of factors he considered.

[14] Although the plaintiff makes arguments regarding sufficiency of reasons in his factum, his counsel advised at the hearing that he was not alleging that the Master’s reasons were insufficient. Rather, he argues that by failing to weigh the plaintiff’s permanent residency status against the other evidence he considered, the Master erred.

[15] In my view, there was ample evidence in the record to allow the Master to conclude that the plaintiff was not ordinarily resident in Ontario. The plaintiff’s permanent residency status was not ignored by the Master. He made specific reference to it in his reasons and was clearly aware of it. However, the Master concluded, in reliance on the evidence I reviewed above, that the plaintiff was not ordinarily resident in Ontario. This factual conclusion was open to him on the record. He made no palpable and overriding error in so finding.

Did the Master err in law in finding that an order for security for costs was just?

[16] The plaintiff argues that, after properly directing himself to the law with respect to security for costs, the Master failed to apply it to the facts of the case. Specifically, he argues that the Master referred to the Court of Appeal’s decision in Yaiquaje et al. v. Chevron, 2017 ONCA 827, in which the court set out factors that have been identified as relevant to an assessment of the justness of an order for security for costs, but that he did not review those factors. The relevant passage, from the Master’s reasons at para. 16, quoting Yaiquaje at paras. 24-25, is:

Courts in Ontario have attempted to articulate the factors to be considered in determining the justness of security for costs orders. They have identified such factors as the merits of the claim, delay in bringing the motion, the impact of actionable conduct by the defendants on the available assets of the plaintiffs, access to justice concerns and the public importance of the litigation. …

While this case law is of some assistance, each case must be considered on its own facts. It is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness of a security for costs order. There is no utility in imposing rigid criteria on top of the criteria already provided for in the Rules. The correct approach is for the court to consider the justness of the order holistically, examining all the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.

[17] Having quoted this passage, the Master indicated he was alive to the case law and the issues noted and guidance emerging for the decisions he reviewed. He averted to the guidance that the rule not be weaponized to prevent a case from being heard on its merits, while also ensuring that defendants not be left “holding the (costs) bag” if an unsuccessful plaintiff has no ability to satisfy an adverse costs award and can easily leave the jurisdiction.

[18] The Master found that there was nothing holding the plaintiff to Ontario, and that the plaintiff has no exigible assets which could satisfy an adverse costs award. He concluded the plaintiff is ordinarily resident outside of Ontario, and that security for costs is just and reasonable in the circumstances of this case to provide protection to the defendants as set out in the rule.

[19] In determining the quantum of costs to be paid in trust to the defendants’ counsel, the Master again made note of the need that the order be just in all the circumstances, and applied his discretion to significantly reduce the costs claimed by the defendants. He disallowed any claim for costs for the pre-trial and trial, without prejudice to the defendants’ ability to seek further costs at a later stage in the litigation. He then further reduced the costs claimed by the defendants to $20,000. In the result, the Master reduced the costs claimed by the defendants by over $53,000, of which about $40,000 was attributable to the claim for trial and pre-trial costs.

[20] The Master did not specifically make a finding on the merits of the plaintiff’s claim. He neither found the claim to be frivolous, nor did he specifically address whether the claim had a good chance of success. However, by balancing the overarching goals of allowing a plaintiff’s claims to proceed while ensuring that defendants are protected from an unenforceable costs award when a plaintiff is not ordinarily resident in the province, it is apparent that he did consider the justice of allowing the plaintiff’s claim to proceed. By reducing the quantum of security significantly from the amount claimed, the Master took into account the plaintiff’s ability to proceed to have his case dealt with on the merits. This reflects a consideration of the merits of the case and the principle of access to justice on the one hand, and the provision of security for costs that may otherwise be uncollectible by the defendants on the other.

[21] I also note that the plaintiff advises that, once Steele J. determined in a case conference that the order for security for costs was not stayed by the appeal, the payment was made to defendants’ counsel in trust within twelve hours. Although this fact was not known to the Master at the time, with hindsight one can safely say that the balance the Master was striving for was met in this case. The plaintiff is in a position to proceed with his claim, without any apparent difficulty given the speed with which he posted security for costs, and the defendants have the protection of the security for costs order while defending the claim of the non-resident plaintiff.

[22] For these reasons, the appeal is dismissed.

Costs

[23] At the hearing of the appeal, the parties agreed to provide me with copies of their costs outlines and the offers to settle that were exchanged. They agreed that, after I wrote my reasons on the merits of the appeal, I would review the offers and costs outlines, and address the costs of the appeal and the impact of the offers to settle, if any, on the basis of the materials filed. I do so now.

[24] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.

[25] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 2004 14579 (Ont. C.A.), 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[26] The defendants seek costs on the appeal of $13,440.22 on a partial indemnity scale, or $16,808.75 on a substantial indemnity scale, a claim that includes costs for the conferences held before Steele J. at which she found that the payment of security for costs was not stayed by the appeal, and at which she also declined to order security for costs for the appeal itself. Justice Steele ordered the costs of the attendances before her be reserved to the judge hearing the appeal.

[27] The defendants’ costs outline demonstrates costs of $13,440.22 on a partial indemnity scale and $16,808.75 on a substantial indemnity scale. The plaintiff’s costs outline demonstrates costs on a partial indemnity basis of $14,087.15.

[28] In determining costs, I note the following:

a. The defendants/respondents are the successful parties on the appeal and are presumptively entitled to their costs.

b. The defendants made an offer on April 13, 2021 offering to dismiss the appeal, and for a payment of $500 in costs, if the offer was accepted by April 19, 2021, and thereafter, for payment of partial indemnity costs. The defendants have beaten this offer.

c. On April 24, 2021, the Saturday before this Monday appeal, the plaintiff offered to allow the appeal without costs. The plaintiff did not beat this offer to settle.

d. The defendants are thus entitled to their costs on a partial indemnity scale up to April 13, 2021, and on a substantial indemnity scale thereafter.

e. The defendants’ costs are lower than the plaintiff’s costs. I thus conclude they are within his reasonable expectations.

f. Defendants’ counsel allocated work to ensure that it was done by the least expensive appropriate timekeeper. Collectively, the defendants’ counsel spent significantly less time than the plaintiff’s counsel, even when accounting for plaintiff’s counsel obligation, as counsel for the appellant, to prepare the appeal book and compendium.

g. Counsel’s hourly rates claimed are reasonable, and the time spent on the appeal is also reasonable having regard to the voluminous record, most of which was prepared by the plaintiff, and which included affidavits of questionable value. I note in particular two affidavits from the plaintiff’s former counsel’s receptionist deposing to substantive matters related to the plaintiff’s claim, and deposing that the plaintiff is “ordinarily resident in Toronto, Ontario, Canada” – a legal conclusion that is inappropriate for inclusion in an affidavit from a staff member of plaintiff’s then-counsel’s firm.

h. The issues in this appeal were not complex, but were made more confusing and complicated by the manner in which the plaintiff chose to litigate them. The appeal was important to the defendants, who risked being forced to defend the plaintiff’s action without a realistic prospect of recovering their costs if they were successful.

[29] Having regard to the foregoing, I conclude that costs of $15,000 are a fair and reasonable amount to reflect partial indemnity costs to the date of the offer, and substantial indemnity costs thereafter. The plaintiff shall pay the defendants $15,000 in costs, all inclusive, within thirty days.

Conclusion

[30] In summary,

a. The plaintiff/appellant’s appeal is dismissed.

b. The plaintiff shall pay costs of $15,000, all-inclusive to the defendant within thirty days.

J.T. Akbarali J.

Date: April 27, 2021