Court File and Parties

COURT FILE NO.: CV-18-00599621 DATE: 20220510 ONTARIO SUPERIOR COURT OF JUSTICE

RE: JUNXIA YU, Appellant -and- CHRISTOPHER LINNELL, ROBERT LINNELL, and UTE LINNELL, Respondents

BEFORE: FL Myers J

COUNSEL: Olando Vinton, for the Appellant Tamara Markovic, for the Respondents

HEARD: May 9, 2022

Endorsement

The Appeal

[1] The appellant appeals from the orders of Case Management Master Josefo (now Associate Justice Josefo) dated August 24, 2021:

a. Requiring the appellant to post security for costs on a pay-as-you-go basis;

b. Granting leave to the respondents to amend their statement of defence to add a limitation period defence;

c. Refusing to order production of Robert Lindell’s unredacted diary entries and his prior lawyer’s entire file; and

d. Refusing to strike affidavits delivered by the respondents in support of their positions on the various motions.

[2] The appellant also originally sought to bring a motion to be heard with the appeal seeking to set aside a consent order dated May 7, 2019 made by Faieta J. Mr. Vinton confirmed that he ultimately had not brought that motion. In addition, the appellant seeks an order that the respondents pay costs of any additional discovery required by the appellant to deal with the new limitation defence to be pleaded by the respondents.

[3] For the reasons that follow the appeal is dismissed.

The Appellant’s Main Ground of Appeal – Natural Justice

[4] The principal ground of appeal asserted is that the Associate Justice failed to provide a fair hearing to the appellant. He is said to have violated the fundamental tenet of audi alteram partem. Mr. Vinton submits that the Associate Justice denied the appellant a fair hearing because he declined to order Robert Linnell to produce an unredacted copy of his diary pages in evidence and he declined to order production of Mr. Linnell’s prior lawyer’s file.

[5] Mr. Vinton submits that it is fundamentally unfair for a judge to use evidence provided in a redacted form while refusing to provide the other side with an unredacted version of the document. This, he submits, undermines justice and the appearance of justice being done.

[6] Mr. Vinton points to no precedents or any legal basis to argue that relying on a redacted document in evidence must always be unfair. Whether it could amount to unfairness in this case is bound up partly in procedural issues.

[7] Mr. Linnell’s redacted diary pages were produced in his affidavit of documents in the spring of 2019. The appellant did not bring a motion to seek production of the full pages prior to examinations for discovery or before the security for costs motion was brought.

[8] In addition, the appellant did not cross-examine Mr. Linnell or seek production of the unredacted document as part of a cross-examinations process. Instead, the appellant chose to come to the motion hearing before the Associate Justice with the request for production. This strategic choice left her open to the consequences that if she was unsuccessful, the motion would proceed on the evidence before the court. And that is what happened.

[9] That is not to say that the decision to decline to order production of the unredacted document is not reviewable. I review the decision below. But wrapping a simple production decision in the garment of natural justice is hyperbole at best in a process in which the appellant had multiple opportunities to advance any argument, seek production of any documents from parties and non-parties, cross-examine all adverse witnesses, and respond to any evidence with whatever evidence she could muster. I reject the argument that proceeding with a hearing with redacted evidence after making a ruling to deny a request for production at the hearing violated natural justice or created any appearance of injustice.

[10] The Associate Justice made the following ruling when asked to require Mr. Linnell to produce an unredacted copy of his diary pages:

[16] A diary is a personal thing, perhaps a touch anachronistic nowadays, yet something nevertheless which will usually contain musings or ramblings intended for the writer's eyes only. A witness may produce some of it, none of it, and not necessarily be compelled to produce more unless the facts of the case so warrant. In this case I have weighed what was produced, the relevance of it, and have considered if there are any obvious gaps in this evidence. Yet other than obvious difficulties in copying the pages, I saw no omissions, glaring or otherwise, in what was excerpted from the diary as pertains to the specific, related issue addressed in Robert's affidavit.

[17] Ultimately, my conclusion is that there is no basis in fairness or otherwise which would cause me to disregard the diary excerpts and the sworn, unchallenged testimony of Robert in his affidavit. Rather, I take such evidence into consideration as part of the evidentiary mix which I will weigh, along with the other evidence in this matter. Considering Robert's testimony in his affidavit, which is consistent with his contemporaneous diary entries pertaining to the trip to China to meet the new in-laws, being the parents of Ms. Yu, I also see no reason to direct further production of his diary.

[11] The appellant says that the Associate Justice made a clear error of fact in finding that the sworn evidence of Robert Linnell was unchallenged. In her affidavit the appellant testified to her opinion that if the Associate Justice allowed the redacted diary pages to be relied upon, the outcome would be unfair. That is not a challenge to the sworn testimony as discussed by the Associate Justice. It was the appellant’s position about the use to which the evidence was being put. The fact is that the substance of Mr. Linnell’s evidence in his affidavit, as corroborated in his redacted diary entry, was not challenged by cross-examinations or by competing evidence. It was unchallenged, sworn evidence of facts.

[12] I have reviewed the diary pages. I agree with the Associate Justice that nothing about their use indicated that the redacted portions were of any relevancy or concern. The appellant offered no evidence or substantive concern about what might be missing or why the redacted portions were required to be disclosed. Apart from simply and wrongly arguing that redactions are always unfair, the appellant offers no indication of any error made by the Associate Justice in his assessment of relevancy or his weighing of prejudice versus probative value.

[13] The appellant asked for production of unredacted pages of documents from Mr. Linnell’s former lawyer’s file. She also sought production of the entire file for the motion. The Associate Justice found:

[20] I disagree with counsel for plaintiff that, for this motion, the only option is that I order the redacted notes of [Mr. Linnell’s former lawyer] be produced, given that Robert has tendered a part of these. Instead, for my purposes on these motions, I simply disregarded these notes in their entirety. Rather than delay the disposition of this motion by directing further production, such limited and stand-alone material in this exhibit can be safely disregarded as I adjudicate the merits of these within issues. Yet it should be clear that, while I entirely disregard the documents at exhibit "H", I do not disregard the references to these events in Robert's affidavit. This is because there is nothing improper in his narrative as to how he obtained advice, including on the taxation/capital gains issues, and why he ostensibly chose not to transfer half the property to Christopher.

[21] Yet, as I accept Mr. Vinton's point that exhibit "H" could possibly be relevant to the action itself, I order that Robert shall revise his affidavit of documents, or provide a supplementary Affidavit of Documents, listing these items from exhibit "H" on Schedule "B" to his Affidavit of Documents. If the parties believe that the privilege claim is worthwhile disputing in the context of the overall action, a motion may be brought to me given this item is related to the within motions and it is simply more efficient that I carry on with this one item, to address whether such documents, unredacted, shall or shall not be produced. To that purpose, I may need to view the entirety of unredacted exhibit "H" when considering whether it is or is not relevant to the within action. Such a motion can be booked through ATC Mr. Marco Magnante, along with the other outstanding issues as discussed herein, closer to the end of these reasons.

[22] As to production of the entire file (beyond these two redacted pages) which [the former lawyer] has pertaining to Robert, going back howsoever long, such is, if indeed this was requested (it is not clear it was, yet I address this to ensure I have addressed all matters before me), quite over- broad. There is no basis, on the record before me, to justify such a request. It seems at this stage both disproportionate and reminiscent of a "fishing expedition". I do not preclude a Rule 30.10 motion in that regard if appellant wishes to pursue such. Yet such a motion must also be on notice to [the former lawyer], who may take a position regarding the potential loss of her client's privilege.

[14] In this case, the redacted lawyer’s notes were not admitted into evidence. They were not used in evidence at all. Mr. Vinton had no basis to argue that the narrative of events in the affidavit was inadmissible. Neither could he show any basis for production of the lawyer’s full file for the purposes of the motion. There is nothing exceptional or even questionable in the Associate Justice’s dealing with this issue.

[15] Once again, I see no basis for the appellant to argue that the Associate Justice’s refusal to order production of unredacted copies of two pages or the entire third-party file made the motion hearing unfair. The appellant saw all evidence adduced before the Associate Justice. She had the opportunity to challenge it by cross-examination, by her own competing evidence, or by evidence from other witnesses. She had the opportunity to seek additional productions from parties and non-parties before examinations for discovery and again before the motion hearing. There is simply nothing unfair about the Associate Justice making evidence and production rulings at the hearing and deciding the issues put before him.

Bad Faith Motion for Security for Costs

[16] The appellant’s next ground of appeal is more difficult to follow. The parties had a without prejudice settlement meeting. The appellant surreptitiously recorded it. Mr. Vinton then inexplicably chose to make use of the recording. On receiving the recording, the respondents then waived privilege as they were quite content to rely on the transcript of the without prejudice meeting as disclosing no wrongdoing on their parts.

[17] During the settlement meeting, Mr. Guy, one of the lawyers for the respondents, made it clear that his clients were only prepared to settle on the basis that they would pay some portion of the costs that they might save by not having to go to trial. He calculated costs, roughly, to give an order of magnitude of a possible settlement payment by the respondents.

[18] In trying to discuss the appellant’s costs risk, Mr. Guy twice hypothesized that the appellant may have retained her counsel on a contingency fee basis. His point was that even if the appellant might pay no fees to her own counsel, she could still be held liable to pay costs to the respondents. He also suggested that the respondents could bring a motion for security for costs prior to trial.

[19] During the settlement meeting and again in court before me, Mr. Vinton asserted strongly that Mr. Guy’s conduct was wrongful. During the settlement call he said:

The second thing is if it is that you want to bring a security for costs motion, let me be very clear with you as to what I would do in that circumstance. My client would be willing to swear an affidavit as to what your statements have been concerning a contingency agreement right here, trying to inquire into the terms of her retainer as to your motivation to bring any such security for costs order. I just want to be clear with you on that, so that we don't do anything which might be seen to be vexatious or oppressive to someone in the position of my client.

So, you know, you talk for your client. I get why you would bring (indiscernible), but in any event, let me just be clear with you as to why [the appellant] asked for my help in the first place, because she was confident that I would fight for her every single interest, and I would pursue them to their just end, okay?

And so, we're not at all -- at all -- deterred by any words of security for costs motion, because that is -- my instructions have been, as you were speaking, to bring something to (indiscernible) the reasons for the bad faith that could be imputed into any such motion for security costs at this very late stage, okay?

[20] As best as I can tell, Mr. Vinton submits that in postulating that the appellant had a contingency fee agreement with him, Mr. Guy was inquiring into the terms of her retainer. By doing that, he exposed his bad faith motive to move for security for costs to try to end the action because the appellant could not pay any security for costs ordered.

[21] Mr. Guy never inquired into the appellant’s retainer. He twice assumed it was a contingency-based retainer for the purposes of his costs discussion. The appellant never confirmed or responded at all. Moreover, even if Mr. Guy had inquired as to the appellant’s retainer, doing so does not preclude a motion for security for costs or disclose a bad faith motive. Nothing in the transcript of the settlement discussion indicated what the appellant’s ability to pay costs may be.

[22] The appellant initially sought costs against Mr. Guy personally as a result of this theory. She waived the request before the hearing before the Associate Justice.

[23] Of greater importance, if the respondents suspect that the appellant may have insufficient assets to pay a costs award, that is not a basis to bar a motion for security for costs. Neither does it show that the motion was brought in bad faith. To the contrary, it is part of the test that the respondents must meet to be entitled to security for costs.

[24] The appellant says the respondents were using the motion for security for costs like a summary judgment motion – to end the action – because she cannot pay costs. But, if she truly cannot afford to pay, the law provides her with a response to a motion for security for costs to protect her right to sue.

[25] If the appellant establishes that she is impecunious, the court will assess whether the action should be allowed to proceed specifically taking into account the justice of her situation. But the burden is on the appellant to establish her impecuniosity by evidence.

[26] In this case, the appellant made no disclosure at all of her financial situation. She concludes that because Mr. Guy mentioned her lawyer’s retainer, that he knew she could not pay a costs award. There is no necessary nexus between the two facts. If however the appellant truly cannot pay a costs award, it was incumbent on her to say so on the motion so the Associate Justice could apply the proper criteria to assess whether the action should be stopped in its tracks or if the interests of justice require that it be allowed to proceed despite the costs risk. It is not Mr. Guy’s mention of the appellant’s retainer agreement that has caused her financial predicament if she has one. Rather, it is her own failure to make the disclosure of her finances to prove she is impecunious if that is indeed the case.

[27] Absent proof that the appellant was impecunious, the Associate Justice applied the correct test to find that there was good reason to believe that the action is both frivolous in substance and being handled in a vexatious manner. These findings are not contested on the appeal.

[28] The Associate Justice also correctly applied the warning from Yaiguaje v. Chevron Corp., 2017 ONCA 827, to guard against security for costs being used for an unjust outcome. He wrote:

[80] As discussed in Chevron, an order for security for costs should only be made if the justness of the case requires it. Again, as Justice Mcleod, in Beatross Estate noted, this can involve a risk analysis. I agree that the stronger is the respondents' case, the more compelling is their argument for security if the evidence is not convincing that the appellant can meet an adverse cost award. Pursuant to Hoe v. Ren, the appellant's right to carry on with her action does not mean that the respondents should be left "holding the (costs) bag".

[81] All the above can be distilled to the need for balance. In this case, I consider:

a. what I believe will be a very uphill battle for the appellant to establish, on the balance of probabilities, proprietary estoppel, which is the essence of her claim.

b. In addition to her action being frivolous, I consider her vexatious conduct,

c. The costs expended by the two elderly respondents to protect their valuable asset, the property.

d. As I discussed near the outset of these reasons, the appellant has been living rent- free for over three years, while the respondents pay the bills. That, in itself, is inequitable.

[82] In all the circumstances of this case, accordingly, an order for security for costs is just.

[29] Each of the listed findings was discussed in detail and grounded in admissible evidence.

[30] There was no basis in the evidence to assert that the motion was brought in bad faith below or on appeal. This ground of appeal cannot succeed.

The Counterclaim

[31] The appellant argues that it would be unjust for her defence to the counterclaim to be prejudiced by the failure of her claim due to security for costs. The appellant submits that if she is ordered to pay security for costs, and if she defaults, and if her claim is then dismissed, she will be prejudiced in her defence to the counterclaim because her defence is partly predicated on her claim being valid.

[32] Mr. Vinton submits that it is unjust for the appellant’s defence to the counterclaim to be determined by a security for costs order that results in the dismissal of the appellant’s action. But the order for security for costs does not preclude the appellant from having a trial on the merits of her claim. The order just requires her to post security for the costs of the respondents.

[33] As noted above, the appellant adduced no evidence before the Associate Justice saying that she cannot afford to post security as ordered. This was her burden as discussed in Yaiguaje. There is no basis in evidence for the appellant to submit that her action will be dismissed if the order for security for costs stands. As such, her argument about how a dismissal might affect her defence to the counterclaim is premature at best.

[34] Moreover, since the claim and counterclaim are being heard together and are closely related on the facts and law, Mr. Vinton likens the motion for security for costs to partial summary judgment. Partial summary judgment is not available where granting it may result in duplication of evidence or inconsistent verdicts at trial. See: Butera v. Chown, Cairns LLP, 2017 ONCA 783. Mr. Vinton submits that the same rule should apply to security for costs.

[35] While Mr. Vinton criticizes the respondents and says they are acting in bad faith by bringing their motion for security for costs to effectively obtain summary judgment, it is he who is linking the disparate processes. Security for costs is not a determination of the claim on its merits. Rather it involves an assessment of the justness of competing costs risks in the litigation. Had the appellant proven that she is impecunious the merits would have been a more important element in the Associate Justice’s analysis. While he did find that there was good reason to believe that the action is both frivolous in substance and that it is being carried vexatiously, that is a very different analysis than summary judgment.

[36] There is no relevancy to any risk of duplication of evidence or inconsistent verdicts as between an order for security for costs in an action and the trial of a counterclaim. The existence of a counterclaim in which the defendant by counterclaim relies on elements of her claim as plaintiff does not bar a defendant from seeking security for costs of the action.

[37] The Associate Justice made a discretionary decision weighing relevant factors. He made no error in principle or law in doing so.

Other Elements of the Appeal

[38] There appellant established no error in the Associate Justice’s decision to refuse to strike out other affidavits that adduced admissible evidence.

[39] The appellant established no error in how the Associate Justice dealt with the respondents’ motion for leave to amend their statement of defence. The appellant proved no prejudice that cannot be compensated in costs or an adjournment to prevent delivery of an amended pleading by the respondents to raise a limitation defence. A limitation defence is a tenable plea. The Associate Justice granted the appellant leave to amend her pleading in response if she chooses to do so.

[40] The appellant established no basis in fact or law for an advance payment to her of costs of any discovery that might result from pleadings amendments.

Costs

[41] The respondents seek costs of the appeal on a substantial indemnity basis due to the elements of vexatiousness in the appellant’s conduct found by the Associate Justice. In my view, the unsupported allegation of bad faith could be a basis to result in elevated costs. But here, the allegation was so empty that it did not have much if any sting. No extra costs were required to respond to the appeal due to the continued allegation or the elements of vexatiousness found by the Associate Justice.

[42] The appellant seeks $24,000 costs of the appeal on a substantial indemnity basis. The respondents seek $13,600 on that basis. In my view, it is fair and reasonable for costs to follow the event. Therefore, the appellant to pay the respondents’ costs fixed at $10,000 on a partial indemnity basis.

FL Myers J

Date: May 10, 2022