COURT FILE NO.: CV-20-637294-0000
DATE: 20220705
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PROVIDENCE GRACE INC., Plaintiff/Respondent
AND:
YARDISTRY LTD., Defendant/Appellant
BEFORE: VERMETTE J.
COUNSEL: Myron Shulgan, for the Plaintiff/Respondent
Stewart Thom, for the Defendant/Appellant
HEARD: December 14, 2021
ENDORSEMENT
[1] The Defendant, Yardistry Ltd. (“Yardistry”), appeals from the Order of Master Brott (now Associate Justice Brott) dated June 1, 2021 dismissing Yardistry’s motion for security for costs.
[2] The appeal is dismissed.
A. FACTUAL BACKGROUND AND ALLEGATIONS IN THE ACTION
[3] The Plaintiff, Providence Grace Inc. (“PGI”), is a corporation incorporated in October 2017 pursuant to the laws of the State of Washington in the United States of America, with its principal office in Washington State. Mary Jackson is the president, director and sole shareholder of PGI. She is a resident of Washington State.
[4] Yardistry is an Ontario corporation that carries on business as a designer, manufacturer and vendor of ready-to-assemble outdoor living products for use by residential customers. Yardistry’s customers are principally large chain retailers.
[5] Prior to establishing PGI, Ms. Jackson was a part owner-operator of Frontier Northwest Inc. (“Frontier”). Frontier provided representation services to Yardistry in its dealings with Costco Wholesale Corporation (“Costco”). Frontier was paid for its services by Yardistry at a commission rate of 1.2% of the net sales receipts from Costco. The terms of the agreement between Frontier and Yardistry were not reduced to writing.
[6] On December 22, 2017, Ms. Jackson entered into a redemption and resignation agreement with Frontier. PGI alleges that Frontier assigned to Ms. Jackson and PGI existing company accounts that Ms. Jackson had been servicing at Frontier, including Yardistry’s account. According to PGI, Frontier’s contract with Yardistry was thereby assigned to PGI along with any commission payments to which Frontier would have otherwise been entitled. PGI pleads that Yardistry agreed to continue the contract with PGI and, in doing so, acquiesced in the same course of dealings that governed its relationship with Frontier.
[7] However, PGI acknowledges in its Statement of Claim that on December 20, 2017, Ms. Jackson met with representatives of Yardistry who informed her of Yardistry’s intention to reduce PGI’s commissions to 0.4% on all shipments beginning January 1, 2018. PGI states that Yardistry would only pay to PGI commissions calculated at the rate of 0.4% on orders filled and invoiced after January 1, 2018, even where such orders were secured prior to January 1, 2018.
[8] PGI pleads that it objected to and consistently disputed Yardistry’s unilateral decision to reduce PGI’s earned commissions, without providing reasonable notice. PGI’s position is that Yardistry was obligated to pay to PGI a 1.2% commission on all sales arising from purchase orders secured prior to December 20, 2017 and on all sales arising from purchase orders secured during a reasonable notice period thereafter.
[9] PGI provided services to Yardistry from December 22, 2017 to September 14, 2018, when Yardistry sent a termination letter to PGI. PGI alleges that it secured Costco orders worth over USD $114 million for Yardistry’s benefit during that period. Prior to its termination, PGI received five commission payments from Yardistry totaling USD $226,847.
[10] PGI pleads that beginning September 14, 2018, Yardistry refused to make any commission payments whatsoever on sales enjoyed under purchase orders secured by PGI prior to its termination.
[11] Yardistry denies that its relationship or agreements with Frontier were assignable or for any fixed term. It states that upon Frontier’s announcement that it would no longer be servicing Yardistry, all contractual and business relations with Frontier or any of its personnel were terminated or otherwise ceased to exist.
[12] Yardistry alleges that PGI was willing and agreed to proceed on the new terms proposed by Yardistry in December 2017, which also included a reduction of the scope of services. It further alleges that PGI did not object or complain about its compensation.
[13] Yardistry states that it was an express or implied term of the agreement between PGI and Yardistry that commissions were payable only on net sales receipts received by Yardistry from Costco during the period in which representation services continued to be provided by PGI. Yardistry denies that PGI has any legal entitlement to compensation in respect of payments received by Yardistry after termination of the agreement with PGI and cessation of services.
[14] PGI commenced this action on March 2, 2020. PGI claims the following relief:
a. an accounting of all sales made by Yardistry pursuant to purchase orders procured by PGI on Yardistry’s behalf;
b. a judgment for the amount of commissions found due and owing to PGI and a declaration in respect of any future commissions owed to PGI;
c. damages for breach of contract in the amount of $1,500,000;
d. alternatively to (c), damages on a quantum meruit basis for unjust enrichment; and
e. aggravated damages, in the amount of $1,000,000.
B. MOTION FOR SECURITY FOR COSTS
[15] Yardistry brought this motion for security for costs by Notice of Motion dated September 18, 2020, a few months after the close of pleadings.
[16] In support of its motion, Yardistry filed a short affidavit of a legal assistant attaching the pleadings, the corporation profile report of PGI and some correspondence between counsel regarding Yardistry’s proposed motion for security for costs. The affidavit also included an estimate of the costs associated with the remaining steps in the action and the following paragraph:
PGI has no known assets in the Province of Ontario, or Canada. Yardistry furthermore has no knowledge of any assets owned by PGI in the United States which could be realized upon in satisfaction of any potential adverse costs award against PGI, should PGI fail to prove its claims and Yardistry become entitled to such an award.
[17] I note that the affidavit filed by Yardistry does not comply with Rules 4.06(2) and 39.01(4) of the Rules of Civil Procedure as it contains evidence that is not within the personal knowledge of the deponent and the sources of her information (e.g., specific employees of Yardistry regarding Yardistry’s knowlegde, counsel regarding the costs/legal fees estimates, etc.) are not specified.
[18] In response to the motion, PGI filed a short affidavit of Ms. Jackson. In her affidavit, Ms. Jackson outlines the facts giving rise to PGI’s claim. She also gives the following evidence:
Assets in Ontario
- The Plaintiff has assets in Ontario. Its assets consist of money on deposit at the branch with which it deals at TD Canada Trust. It has a present account receivable from the Defendant. It will generate additional receivables from commissions to which it will be entitled in 2021 for services it provides to an Ontario manufacturer.
The Defendant’s Acknowledgement of Present Indebtedness to the Plaintiff
- The Defendant has acknowledged to me that it is presently indebted to the Plaintiff for unpaid commissions but only for amounts totalling $13,102.82 (USD) for services the Plaintiff performed on the Defendant’s behalf. The Defendant has refused to remit payment of that amount to the Plaintiff unless the Plaintiff agrees to sign a release absolving the Defendant from any further payment obligations for services performed on its behalf by the Plaintiff. I have refused to comply with the Defendant’s request.
Ability to Fulfill the Cost Order/Covid Pandemic
The loss of the Defendant’s business had a dramatic impact on the Plaintiff’s business. The Defendant was the Plaintiff’s largest client.
Since the loss of the Defendant’s business, the Plaintiff has secured a replacement manufacturer in the U.S. from whom the Plaintiff expects to replace the commissions formerly generated from the Defendant. However, the volumes of business the Plaintiff’s replacement client is generating had been limited by the effects of the Covid pandemic.
The Plaintiff, since mid-March, 2020, has had no opportunity to perform services in Ontario as a result of restrictions imposed in consequence of the Covid pandemic. The restrictions imposed by the Canadian government on foreign travellers into Canada and by the U.S. Government on American travellers returning to the USA from out of the country make it almost impossible for the Plaintiff to secure representation of Canadian manufacturers at the present time or to generate significant commissions from its Canadian clients.
It will be very difficult, if not impossible, for the Plaintiff to post security for costs in excess of an amount equal to the sum in which the Defendant is presently indebted to the Plaintiff because of the impact the Covid pandemic has had on the North American economy. The Plaintiff’s ability to generate revenues has been significantly impaired.
Undertaking
- I have $110,000.00 in a personal investment account I maintain. A copy of the balances in that account are attached hereto as Exhibit “F”. I agree that in the event that the Defendant [sic] becomes liable for the costs of this proceeding I undertake to this Honourable Court to permit the Defendant to enforce any cost award it enjoys in this proceeding from that fund.
Prejudice
- The prejudice the Plaintiff will suffer, if it is not permitted to continue to pursue this claim unless it posts security for costs, is far greater than the prejudice the Defendant will suffer if the Defendant’s motion is dismissed. The Defendant continues to enjoy sales revenues generated from the services provided for its benefit by the Plaintiff.
[19] Yardistry filed two affidavits in reply: an affidavit of an articling student who describes efforts that were made to verify the existence of PGI’s Ontario office, and an affidavit of Mat Wolf, Vice-President Finance of Yardistry. Mr. Wolf’s affidavit mainly contains hearsay evidence regarding the involvement (or lack thereof) of Jeff Bennett in PGI. Mr. Bennett’s name is not mentioned in Ms. Jackson’s affidavit, but Ms. Jackson refers to an employee of PGI in Ontario and Mr. Bennett is PGI’s alleged employee. The only paragraph of Mr. Wolf’s affidavit that does not deal with Mr. Bennett and addresses the facts of the case states as follows:
Yardistry has furthermore reviewed the Affidavit of Ms. Jackson and disputes, for the record, Ms. Jackson’s characterizations of the work performed for Yardistry, the agreements with either Frontier or PGI, as well [sic] the amounts Ms. Jackson claims she is entitled to. The nature of Yardistry’s disputes on these issue [sic] is set out in the Statement of Defence of Yardistry and need not be recounted fully for the purposes of this motion. Yardistry views PGI’s claims as being without merit.
[20] During his cross-examination, Mr. Wolf stated that he never had direct involvement or personal dealings with Frontier or PGI/Ms. Jackson. The question of whether approximately $13,000 in commissions earned by PGI remained unpaid (see paragraph 23 of Ms. Jackson’s affidavit reproduced above) was refused.
C. THE ASSOCIATE JUDGE’S DECISION
[21] The Associate Judge heard the motion on April 22, 2021 and released her decision on June 1, 2021. Her endorsement reads, in part:
[3] The defendant now brings this motion seeking leave to compel the plaintiff to post $135,000 as security for costs. On these motions, the courts have established a two-step process. The initial onus is on the moving party to satisfy the court that it appears there is good reason to believe that the matter comes within one of the enumerated areas in Rule 56.01(1). Yardistry moves pursuant to Rule 56.01(1)(a) and/or 56.01(1)(d).
[9] While is it [sic] arguable whether or not the defendant has met the onus under 56.01(1)(a) in light of Providence’s evidence, it does seem clear that the defendant has met the light onus under Rule 56.01(1)(d).
[10] Once the first step is satisfied, the onus shifts to the responding party to establish that an order for security for costs would be unjust. Providence can meet that onus by demonstrating one of the following:
It has appropriate or sufficient assets in Ontario or in a reciprocating jurisdiction to satisfy any order of costs made in the litigation;
It is impecunious and that its claim “is not plainly devoid of merit”; or
If Providence cannot establish that it is impecunious, but it does not have sufficient assets to meet a costs order, that its claim has a “good chance of success” on the merits. […]
[11] The plaintiff does not allege impecuniosity. The plaintiff’s evidence is that it does not presently have funds available to it to post security for costs. It alleges that its inability to do so results as a direct consequence of the defendant’s alleged wrongful refusal to pay to Providence the commissions to which the plaintiff claims entitlement. Further, there is uncontradicted evidence that the defendant is presently indebted to the plaintiff in the amount of $13,000 for outstanding commissions.
[12] Providence has failed to provide much evidence of its assets in Ontario. Caselaw is clear that the plaintiff faces a high onus to demonstrate with “robust particularity” the state of its finances. As stated by Master Dash in Marion Custom Metals Inc. v Arlat Metals Inc. [2003] O.T.C. 1046 (Sup. Ct.) at para 24:
It is incumbent on the corporation to provide information and supporting documentation as to the current status of its assets and liabilities secured against those assets put forward as available to pay a judgment for costs.
[13] An order for security for costs is highly discretionary. The Court may make such order “as is just”. There is caselaw in support of the defendant’s position which notes that even where a plaintiff resides in a foreign jurisdiction with reciprocating enforcement of judgments legislation, the existence of the legislation is only a factor to be considered in the exercise of judicial discretion (Smallwood v Sparling (1983) 1983 CanLII 1930 (ON SC), 34 C.P.C. 24 (Ont. S.C.).
[14] Significantly Mary has undertaken to make funds in excess of $100,000.00 standing to her personal credit in an investment account that she maintains, available to Yardistry to satisfy any costs awards granted to the defendant, should the plaintiff’s action be unsuccessful. The defendant submits that even though the US is a reciprocating jurisdiction, the plaintiff must establish that the assets can be conveniently realized upon and it has failed to do so. The plaintiff on the other hand asserts that she can freely access her IRA. There is no conclusive evidence from either party about the exigibility of the account.
[15] On the merits of the claim Yardistry relies on privity of contract and asserts that neither Mary nor Providence as assignee, has privity of contract with the defendant. However, the defendant has acknowledged that it owes to the plaintiff the sum of $13000 and further acknowledges the past relationship between Yardistry and Mary’s predecessor, Frontier. Although there is no written agreement between Mary and Yardistry, the standard of practice speaks for itself and it will be up to the trial judge to make a final determination as to whether the defendant had to provide formal notice to the plaintiff of its intentions to alter the agreement.
[16] Security for costs motions are intended to protect defendants from unmeritorious claims. The motion is not meant to unjustly deny a foreign plaintiff from pursuing its legitimate claims in Ontario.
[17] In balancing the defendant’s interest in being protected from the risk of not being able to collect an order for costs if one is made and the plaintiff’s interest in pursuing the action, I accept and rely on the plaintiffs’ [sic] undertaking that she will make her personal account available to the defendant if necessary. The plaintiff should not be prevented from advancing this action. There is no evidence that the defendant will in any way be prevented from defending this action. I accordingly find that to make an order for security for costs at this time would be unjust. This motion is therefore dismissed.
[22] The formal Order provides that the motion is dismissed “without prejudice to renew the request for security for costs after discoveries are completed.” The preamble of the Order contains the following paragraph which refers to Ms. Jackson’s undertaking:
ON READING the material filed and on hearing the submissions of the lawyer(s) for the parties and in receipt of the undertaking of Mary Jackson to permit the Defendant to satisfy any cost award it may receive on the completion of this proceeding from her personal assets.
D. POSITIONS OF THE PARTIES
1. Position of Yardistry
[23] Yardistry submits that while the Associate Judge correctly concluded that Yardistry had satisfied its onus to engage Rule 56.01 and correctly stated the onus upon the Plaintiff in response, she failed to apply the very legal principles that she referenced as those applicable, and she exercised her discretion based upon wrong principles that are inconsistent with the jurisprudence.
[24] In its Notice of Appeal, Yardistry alleges fifteen errors or law, twelve palpable and overriding errors and six errors of principle in the Associate Judge’s exercise of discretion.
[25] At the hearing of the appeal, Yardistry condensed its grounds of appeal and submitted that the Associate Judge had made four major errors:
a. While the Associate Judge concluded that it would be unjust to order security for costs, she did not make any finding as to whether PGI had met its onus to prove one of the three elements at the second step of the test, as set out in paragraph 10 of her endorsement, and she did not raise any other factor supporting a finding that ordering security for costs would be unjust.
b. She erred in relying on Ms. Jackson’s undertaking regarding her personal investment account.
c. She erred by shifting the burden of proof onto Yardistry at the second stage of the analysis.
d. She made a palpable and overriding error of fact in finding that PGI would be prevented from advancing this action if it was ordered to pay security for costs as there was no evidence that could support such a finding.
[26] Yardistry submits that while the Associate Judge based her decision on financial hardship that would be suffered by PGI if an order for security for costs was made, she made no finding that such hardship would in fact result nor did she consider whether financial hardship had been proven by PGI to the applicable standard set out in the case law, i.e. with robust particularity. Yardistry further submits that the Associate Judge undertook no analysis as to whether PGI’s claim had “a good chance of success”. Yardistry states that the Associate Judge erred in law when she stated that “[s]ecurity for costs motions are intended to protect defendants from unmeritorious claims” in the context of a case where impecuniosity was not alleged.
[27] Yardistry argues that the Associate Judge erred in law in her reliance and acceptance of Ms. Jackson’s undertaking. It states that the manner in which the Associate Judge dealt with the undertaking is not consistent with the decision of Justice Corbett in Printing Circles Inc. v. Compass Group Canada Ltd., 2007 CanLII 57095 at paras. 41-43 (Ont. S.C.J.) (“Printing Circles”). Yardistry also submits that the Associate Judge did not consider whether PGI had demonstrated both the sufficiency and the adequacy of the asset relied upon, i.e. Ms. Jackson’s investment account. Yardistry points out that PGI did not challenge Yardistry’s submission that Ms. Jackson’s account was exempt from seizure or enforcement under Washington State law and incapable of being realized upon. In Yardistry’s view, the undertaking is essentially meaningless.
[28] Yardistry further argues that the Associate Judge ignored Ms. Jackson’s evidence that since she could withdraw all the funds in her account now, she had the ability to pay security for costs if required, but it was simply Ms. Jackson’s preference to provide an undertaking and release funds at a later date, if necessary.
[29] Yardistry submits that the Associate Judge exercised her discretion on the wrong principles when she stated in her conclusion that “[t]here is no evidence that the defendant will in any way be prevented from defending this action.” According to Yardistry, there is no requirement that a defendant adduce evidence that its ability to defend the action would be prejudiced if security for costs were not ordered, nor is such a consideration rationally connected to the underlying objectives of security for costs. Yardistry also submits that the Associate Judge exercised her discretion on the wrong principles when she failed to follow the second prong of the test for security for costs set out in paragraph 10 of her endorsement, which is the conventional way in which injustice is established. Yardistry expresses the view that the Associate Judge did not rely on any other or different factors or circumstances to ground her conclusion that it would be unjust to order security for costs in this case.
[30] Finally, Yardistry argues that the Associate Judge made a palpable and overriding error of fact when she stated that “the defendant has acknowledged that it owes to the plaintiff the sum of $13000”. Yardistry argues that the Associate Judge disregarded, misapprehended or failed to appreciate relevant evidence, made a finding not reasonably supported by the evidence and drew an unreasonable, unsupported and directly contradicted inference on this point. Yardistry points out that PGI has adduced no evidence in support of this alleged acknowledged liability and Yardistry has denied PGI’s claims.
2. Position of PGI
[31] PGI submits that the Associate Judge applied the right test. It further submits that the two-step legal inquiry under Rule 56.01 does not require a strict interpretation of that Rule, but, rather, an examination of all the evidence to determine if an order for security for costs would be just. While this analysis includes consideration of the merits of the claim, PGI states that the merits of the claim are only supposed to be considered as one factor on a continuum based on all the circumstances and, consequently, the court should not embark upon an analysis of the merits as if dealing with a motion for summary judgment.
[32] PGI notes that, while the Associate Judge concluded that Yardistry had satisfied the first prong of the analysis, she exercised her discretion at the second stage and found that an award of security for costs would be unjust based on all the relevant factors before her. PGI refers to the discussion in paragraph 15 of the Associate Judge’s endorsement and argues that when exercising her discretion, the Associate Judge gave the merits of the claim proper consideration. According to PGI, the weight afforded to the merits of the issues was appropriately balanced as one factor alongside the relevant circumstances in this proceeding. PGI submits that the relevant circumstances in this case, which were considered by the Associate Judge before exercising her discretion, included the following:
a. PGI’s insufficient assets in Ontario and funds available to pay costs to Yardistry;
b. PGI’s alleged inability to pay security for costs because of Yardistry’s wrongful refusal to pay the commissions to which PGI claims entitlement;
c. the indebtedness of Yardistry to PGI in the amount of $13,000;
d. Ms. Jackson’s undertaking to make personal funds in excess of $100,000 available;
e. the merits of the claim;
f. the purpose of security for cost; and
g. Yardistry’s ability to renew its motion for security for costs after the completion of the examination for discovery of PGI.
[33] PGI argues that all of the Associate Judge’s factual conclusions were supported by the evidence before her, and that none of the findings of fact can be described as being obviously or noticeably erroneous such that a palpable and overriding error occurred.
[34] PGI’s position is that the Associate Judge correctly applied both prongs of the Rule 56.01 enquiry in her analysis, and that she applied the correct legal principles and took a holistic approach when exercising her discretion. Therefore, her decision should not be interfered with.
E. DISCUSSION
1. Standard of appellate review
[35] The standards of appellate review that apply to judges’ decisions also apply to associate judges’ decisions: see Zeitoun v. The Economical Insurance Group, 2019 ONCA 415 at para. 1. Thus, as set out in Housen v. Nikolaisen, 2002 SCC 33, the standard of correctness applies to questions of law and the standard of palpable and overriding error applies to questions of fact and questions of mixed fact and law, unless an error of law can be extricated from the mixed question of fact and law, in which case the standard of correctness applies.
[36] The standard of palpable and overriding error was described as follows by the Court of Appeal in Farsi v. Da Rocha, 2020 ONCA 92 at para. 35:
A palpable and overriding error is one that is clearly wrong, unreasonable, or not reasonably supported on the evidence: H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401, at para. 110. The Supreme Court recently explained in Salomon v. Matte‑Thompson, 2019 SCC 14, 432 D.L.R. (4th) 1, at para. 33, “[w]here the deferential standard of palpable and overriding error applies, an appellate court can intervene only if there is an obvious error in the trial decision that is determinative of the outcome of the case.”
[37] The fact that an alternative factual finding could be reached based on a different ascription of weight does not mean that a palpable and overriding error has been made: see Nelson (City) v. Mowatt, 2017 SCC 8 at para. 38 and Salomon v. Matte‑Thompson, 2019 SCC 14 at para. 33.
[38] Thus, an appeal from an associate judge’s decision is not a rehearing. On questions of fact and mixed fact and law, deference applies, and the role of the reviewing court is limited. An appellate court cannot substitute its interpretation of the facts or reweigh the evidence simply because it takes a different view of the evidence from that of the associate judge. See Prescott v. Barbon, 2018 ONCA 504 at para. 11.
2. Applicable test on a motion for security for costs
[39] Rule 56.01(1) of the Rules of Civil Procedure reads, in part:
WHERE AVAILABLE
56.01 (1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,
(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
[40] While the case law dealing with motions for security for costs discusses various factors (see, e.g., paragraph 10 of the endorsement of the Associate Judge in this case), the test for ordering security for costs requires a judicial officer, after analysing the specific factors set out in the rules, to consider the overall justness of the order: see Novak v. St. Demetrius (Ukrainian Catholic) Development Corporation, 2018 ONCA 219 at para. 7. The justness of the order sought is the overarching principle to be applied to all the circumstances: Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at para. 19 (“Yaiguaje”).
[41] The Court of Appeal discussed the principles applicable to a motion for security for costs in its 2017 decision in Yaiguaje. In that case, the motion judge ordered the appellants to post security for costs. The motion judge found that the appellants had not established that they were impecunious or that third party litigation funding was unavailable. Because the motion judge concluded that impecuniosity had not been established, she ruled that the appellants had to demonstrate that their claim had a good chance of success. On a review of the merits of the claim, she found that the appellants had not met that onus.[^1] See Yaiguaje at paras. 14-15.
[42] The Court of Appeal subsequently set aside the motion judge’s order requiring the appellants to post security for costs. The Court stated the following (at paras. 22-25):
[22] In deciding motions for security for costs, judges are obliged to first consider the specific provisions of the Rules governing those motions and then effectively to take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront. While the motion judge concluded that an order for security for costs would be just, with respect, she failed to undertake the second part of that analysis. The failure to consider all the circumstances of the case and conduct a holistic analysis of the critical overarching principle on the motion before her constitutes an error in principle. It therefore falls to this panel to conduct the necessary analysis of the justness of the order sought.
(ii) Justness of the order
[23] The Rules explicitly provide that an order for security for costs should only be made where the justness of the case demands it. Courts must be vigilant to ensure an order that is designed to be protective in nature is not used as a litigation tactic to prevent a case from being heard on its merits, even in circumstances where the other provisions of Rules 56 or 61 have been met.
[24] 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. […]
[25] 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.
See also Fulop v. Corrigan, 2020 ONSC 1648 at para. 90.
3. Application to this case
a. The Associate Judge applied the correct test and did not err in law
[43] In light of the decision of the Court of Appeal in Yaiguaje, I find that the Associate Judge applied the correct test for security for costs.
[44] It is agreed by all parties that the Associate Judge did not err at the first stage of the test. Yardistry’s position is that she erred at the second stage of the test.
[45] As set out in Yaiguaje, the second stage of the test is to consider the justness of the order sought in all the circumstances of the case. The Associate Judge did that. While it is true that she did not make specific findings with respect to the factors set out in paragraph 10 of her endorsement, this was not strictly required. The Court of Appeal stated in Yaiguaje that there was no utility in imposing rigid criteria to be used in all cases in determining the justness of a security for costs order. 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 sought be made. The Associate Judge adopted such an approach in this case.
[46] One of Yardistry’s main complaints with respect to the application of the test is that the Associate Judge did not make any finding as to whether PGI’s claim had “a good chance of success”. This complaint cannot be given any weight in light of Yaiguaje. In that case, the motion judge followed the test that Yardistry argues the Associate Judge should have followed in this case. The motion judge made an order for security for costs as she found that (a) impecuniosity had not been established, and (b) the appellants had not met their onus to show that their claim had a good chance of success. Nevertheless, her order was set aside by a full panel of the Court of Appeal because she was found not to have considered all the circumstances of the case and not to have conducted a holistic analysis. Thus, a finding as to whether a claim has a good chance of success is not determinative and, consequently, the failure to make such a finding does not constitute in itself an error.
[47] In this case, the Associate Judge discussed the issue of the merits of the claim and considered that factor. The extent to which she could perform an analysis of the merits was rather limited: while Ms. Jackson gave evidence in her affidavit regarding her claims and allegations, albeit briefly, Yardistry, in contrast, refused to engage on this issue and only included a short denial in its evidence by an affiant who had practically no involvement in the relevant events. In the circumstances, it would not have been appropriate for the Associate Judge to make a decisive assessment of the merits: see AAD Investments Inc. v Casboro Industries Limited, 2017 ONSC 3041 at para. 7.
[48] I also find that, contrary to Yardistry’s allegation, the Associate Judge did not shift the burden of proof onto Yardistry at the second stage of the test. The Associate Judge clearly states in paragraph 10 of her endorsement that once the first step of the test is satisfied, the onus shifts to PGI to establish that an order for security for costs would be unjust. Yardistry complains about the statement of the Associate Judge in paragraph 16 of her endorsement to the effect that “[s]ecurity for costs are intended to protect defendants from unmeritorious claim”. Yardistry submits that this is an incorrect statement of the purpose of security for costs. While that may be the case, this statement in itself does not indicate that the Associate Judge shifted the burden of proof onto Yardistry. I also note that in the following paragraph of her endorsement (paragraph 17), the Associate Judge correctly refers to the interests engaged on a motion for security for costs, including the defendant’s interest in being protected from the risk of not being able to collect an order for costs if one is made. In my view, the impugned statement in paragraph 16 had no impact on the analysis or the outcome of the case.
[49] When arguing that the Associate Judge improperly shifted the burden of proof onto Yardistry, Yardistry also relies on the Associate Judge’s statement in paragraph 17 of her endorsement that “[t]here is no evidence that the defendant will in any way be prevented from defending this action.” I agree that this statement raises some concerns, as it could be interpreted as requiring the defendant to adduce evidence that it would be prejudiced if an order for security for costs was not made. However, when looking at the Associate Judge’s endorsement as a whole, I am satisfied that she did not shift the burden of proof onto Yardistry, and that her statement in paragraph 17 only reflects one factor that she considered. Such a factor could legitimately be considered, as shown by the Court of Appeal’s decision in Yaiguaje where the Court considered the following factor when assessing the justness of an order for security for costs (at paragraph 26(c)):
In contrast to the position of the appellants, Chevron Corporation and Chevron Canada have annual gross revenues in the billions of dollars. It is difficult to believe that either of these two corporations, which form part of a global conglomerate with approximately 1,500 subsidiaries, require protection for cost awards that amount or could amount to a miniscule fraction of their annual revenues.
[50] Thus, the impact of not making an order for security for costs on the defendant can be a legitimate factor to consider at the second stage of the test for security for costs when considering the overall justness of the order sought.
[51] I therefore conclude that the Associate Judge did not make an error of law as she correctly articulated the applicable legal test and she applied that test.
b. The Associate Judge did not make any reviewable error with respect to Ms. Jackson’s undertaking
[52] Yardistry complains about the sufficiency and adequacy of Ms. Jackson’s undertaking. However, it is not the role of this Court as an appellate court to revisit the Associate Judge’s findings regarding the sufficiency of Ms. Jackson’s undertaking: see 250 Front Street West Inc. v. DCT5 Inc., 2018 ONSC 1159 at para. 12 (“250 Front”). Such a question is a question of fact or mixed fact and law. The Associate Judge was aware of Yardistry’s arguments with respect to the undertaking and referred to them in her endorsement, but, ultimately, she decided to accept and rely on Ms. Jackson’s undertaking. Her conclusion in this respect is entitled to deference.
[53] I note that the issue of whether Ms. Jackson’s investment account is exempt from seizure or enforcement under Washington State law was raised for the first time by Yardistry during its cross-examination of Ms. Jackson. Thus, Ms. Jackson did not have the opportunity to file reply evidence on this point. I also note that proof of foreign law requires expert evidence, which neither party adduced.
[54] Yardistry raises additional issues regarding the Associate Judge’s acceptance of Ms. Jackson’s undertaking based on the case Printing Circles. These arguments were also raised in 250 Front and were ultimately rejected: see paras. 13-16. I adopt the reasoning of Justice Copeland (as she then was) in that case.
c. The Associate Judge did not make a palpable and overriding error
[55] Yardistry argues that the Associate Judge made a palpable and overriding error of fact in paragraph 17 of her endorsement where she states that “[t]he plaintiff should not be prevented from advancing this action.” According to Yardistry, there was no evidence before the Associate Judge that could support a finding that PGI would be prevented from advancing this action if it was ordered to pay security for costs.
[56] I find that there was evidence in the affidavit of Ms. Jackson that could support the finding of the Associate Judge. What Yardistry is really arguing is that this evidence was insufficient. However, on appeal, I cannot substitute my interpretation of the evidence/facts or reweigh the evidence simply because I may take a different view of the evidence from that of the Associate Judge. Thus, I conclude that the Associate Judge did not make a palpable and overriding error on this point.
[57] I agree with Yardistry that the Associate Judge may have erred in fact when she stated that “the defendant has acknowledged that it owes to the plaintiff the sum of $13000”. There is no such acknowledgement on the part of Yardistry in the evidence. In her affidavit, Ms. Jackson states that Yardistry has acknowledged to her that it is presently indebted to PGI for unpaid commissions in the amount of USD $13,102.82. However, this is disputed by Yardistry. In his affidavit, Mr. Wolf states that Yardistry disputes the amounts that PGI and Ms. Jackson claim they are entitled to.
[58] I say that the Associate Judge may have erred in fact because she refers earlier in her endorsement to the “uncontradicted evidence that the defendant is presently indebted to the plaintiff in the amount of $13,000 for outstanding commissions.” Given the short and blanket denial contained in Mr. Wolf’s affidavit, this could be a defensible characterization of the evidence on this point, and the Associate Judge’s later statement about the acknowledgement may be her conclusion on the evidence. However, given that the Associate Judge does not address Yardistry’s denial and does not explain why she accepts Ms. Jackson’s evidence over Mr. Wolf’s, she may have missed the fact that the alleged acknowledgement in Ms. Jackson’s affidavit was disputed by Yardistry.
[59] In my view, however, if there was an error of fact, this error does not constitute a palpable and overriding error as it is not determinative of the outcome of the case. Further, it would have been open to the Associate Judge to accept Ms. Jackson’s evidence on this issue and to draw an adverse inference against Yardistry given that Yardistry failed to respond to the specific evidence on the alleged acknowledgement in Ms. Jackson’s affidavit; it refused a question on this issue during Mr. Wolf’s cross-examination; and it put forward only one affiant from Yardistry and that affiant had never had dealings with Frontier, PGI and Ms. Jackson and had almost no relevant information regarding the merits of the case. As stated above, this may be what the Associate Judge did.
F. CONCLUSION
[60] Accordingly, Yardistry’s appeal is dismissed.
[61] Counsel advised me at the end of the hearing that they had reached an agreement with respect to the costs of the appeal, i.e. the successful party would be entitled to costs in the amount of $7,500.00. In my view, this amount is fair and reasonable. Therefore, I order that Yardistry pay to PGI its costs of the appeal in the all-inclusive amount of $7,500.00 within 30 days. Given the result of the appeal, the Associate Judge’s costs award remains undisturbed.
Vermette J.
Date: July 5, 2022
[^1]: While Yaiguaje deals with security for costs at the appeal level under Rule 61.06 of the Rules of Civil Procedure, the Respondents in that case were relying on Rule 61.06(b), i.e. that “an order for security for costs could be made against the appellant under Rule 56.01”: see Yaiguaje at para. 17. Therefore, the discussion in Yaiguaje applies to a case decided under Rule 56.01.