Court File and Parties

COURT FILE NO.: CV-22-00683592 MOTION HEARD: 20230908 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: William Adamson Skelly and Adamson Barbecue Limited, Applicants AND: His Majesty the King in Right of Ontario, City of Toronto, Board of Health for the City of Toronto, and Eileen De Villa, Respondents

BEFORE: Associate Justice B. McAfee

COUNSEL: S. Zachary Green, Counsel, for the Moving Party, His Majesty the King in Right of Ontario Ian J. Perry, Counsel, for the Responding Parties, William Adamson Skelly and Adamson Barbecue Limited

HEARD: September 8, 2023

Reasons for Decision

[1] This is a motion brought by the respondent His Majesty the King in Right of Ontario (Ontario) for an order for security for costs. Ontario seeks an order requiring the applicants William Adamson Skelly (Mr. Skelly) and Adamson Barbecue Limited (Adamson BBQ) (collectively the applicants) to post security for costs of the application in the amount of $30,000.00.

[2] The applicants previously operated restaurants in Ontario. During the COVID-19 pandemic, restaurants were regulated under a variety of public health measures. For a period of time starting in 2020, restaurants in Toronto were not permitted to offer indoor and patio dining, although they were permitted to operate for take-out, delivery and drive-through services. These restrictions, which were lifted in 2021, were set out in Ontario Regulation 82/20 under the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020, S.O. 2020, c. 17 (the ROA). O. Reg. 82/20 was revoked entirely on March 16, 2022.

[3] On November 24, 25 and 26, 2020, the applicants opened for indoor and patio dining, contrary to O. Reg. 82/20.

[4] On November 28, 2020, Ontario commenced an application pursuant to section 9 of the ROA for an order restraining the applicants from contravening O. Reg. 82/20. On December 4, 2020, the application was heard by Justice Kimmel. Justice Kimmel granted the restraining order. Justice Kimmel found that the applicants had “openly disregarded” public health orders, operated “in open defiance of” the rules, and were in “clear breach” of O. Reg. 82/20. While the applicants characterized their defiance of the law as “civil disobedience”, Justice Kimmel stated that “[t]his court does not condone civil disobedience of public health and welfare regulations.” Justice Kimmel fixed costs in the amount of $15,000.00 (the December 4, 2020 fixed costs) but did not make an order regarding payment at that time. Her Honour contemplated that the applicants could bring a come-back motion to vary or set aside the injunction (Her Majesty the Queen in Right of Ontario v. Adamson Barbecue Limited, 2020 ONSC 7679 (Ont. S.C.J.)).

[5] On June 28, 2021, the come-back motion and notice of constitutional question were before Justice Akbarali. Justice Akbarali found that there was no jurisdiction to adjudicate the issues because of the manner in which they were constituted in the motion. The motion was dismissed without prejudice to the applicants to seek relief against Ontario in a properly constituted proceeding (Ontario v. Adamson Barbecue Limited and Skelly, 2021 ONSC 4660 (Ont. S.C.J.)).

[6] On July 13, 2021, Justice Akbarali ordered the applicants to pay costs of the June 28, 2021 motion in the amount of $15,000.00. The costs were payable to Ontario within 30 days. Justice Akbarali deferred the issue of payment of the December 4, 2020 fixed costs until a determination of the merits of the applicants’ constitutional challenge. If, however, the proceedings were not properly constituted within 6 months, Justice Akbarali permitted Ontario to write to have the issue of the December 4, 2020 fixed costs addressed (Ontario v. Adamson Barbecue Limited and Skelly, 2021 ONSC 4924 (Ont. S.C.J.)).

[7] On February 1, 2022, Justice Akbarali ordered the applicants to pay the December 4, 2020 fixed costs to Ontario within 30 days (Ontario v. Adamson Barbecue Limited and Skelly, 2022 ONSC 726 (Ont. S.C.J.)).

[8] On June 30, 2022, the applicants commenced their application. The applicants seek, among other relief, a declaration that various provisions of the ROA are unconstitutional and an order discharging the order of Justice Kimmel dated December 4, 2020. The application is scheduled for a 3-day hearing commencing October 1, 2024.

[9] On this motion for security for costs Ontario relies on Rule 56.01(1) (a) and (d) and, if necessary, (e) of the Rules of Civil Procedure. Rule 56.01(1)(a), (d) and (e) provide:

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;

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or

[10] The application of Rule 56.01(1) involves a two-step analysis. With respect to Mr. Skelly, the first step of the analysis requires Ontario to establish that it appears that Mr. Skelly is ordinarily resident outside of Ontario. With respect to Adamson BBQ, the first step of the analysis requires Ontario to establish that it appears that Adamson BBQ is a corporation or a nominal applicant and there is good reason to believe that the Adamson BBQ has insufficient assets in Ontario to pay the costs of the Ontario. If Ontario discharges its initial onus, the second step of the analysis requires the applicants to establish the basis for a broad flexible exercise of discretion that an order for security for costs would be unjust (Coastline Corp. v. Canaccord Capital Corp., [2009] O.J. No. 1790 (Ont. Master) at para. 7).

[11] Pursuant to Rule 56.02, counsel for the applicants confirmed that Mr. Skelly is not ordinarily resident in Ontario. On the motion, counsel for the applicants confirmed that there is no issue that Ontario has satisfied its initial onus with respect to Mr. Skelly.

[12] With respect to Adamson BBQ, I am satisfied that Ontario has discharged its initial onus under Rule 56.01(1)(d). I am satisfied that it appears that Adamson BBQ, a corporation, has insufficient assets in Ontario to pay Ontario’s costs. According to the notice of application, Adamson BBQ formerly operated two barbecue restaurants in the City of Toronto and one in Aurora. The restaurants ultimately closed, and the applicants no longer operate restaurants in Ontario.

[13] Having found that Ontario has satisfied its initial onus with respect to Adamson BBQ under Rule 56.01(1)(d), it is not necessary to determine if Ontario has also satisfied its initial onus under Rule 56.01(1)(e).

[14] The onus now shifts to the applicants to satisfy the court that an order for security for costs would be unjust.

[15] In Yaiguaje v. Chevron Corp., 2017 ONCA 827 at paragraphs 23-25, the Court of Appeal states as follows with respect to consideration of the 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 rr. 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. See: Hallum v. Canadian Memorial Chiropractic College (1989), 70 O.R. (2d) 119 (H.C.); Morton v. Canada (Attorney General) (2005), 75 O.R. (3d) 63 (S.C.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 99 O.R. (3d) 55 (S.C.); Wang v. Li, 2011 ONSC 4477 (S.C.); and Brown v. Hudson’s Bay Co., 2014 ONSC 1065, 318 O.A.C. 12 (Div. Ct.).

[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 of the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.

[16] I was not referred to evidence from the applicants concerning impecuniosity. If alleging impecuniosity, the onus is on the applicants to establish impecuniosity. As summarized in Coastline at para.7(viii) - (x):

(viii) The evidentiary threshold for impecuniosity is high, and “bald statements unsupported by detail” are not sufficient. The threshold can only be reached by “tendering complete and accurate disclosure of the plaintiff’s income, assets, expenses, liabilities and borrowing ability, with full supporting documentation for each category where available or an explanation where not available” (Uribe v. Sanchez (Ont. S.C.J. – Mast.) at para. 12; Shuter v. Toronto Dominion Bank (S.C.J. – Mast.) (“Shuter”) at para. 76);

(ix) To meet the onus to establish impecuniosity, “at the very least, this would require an individual plaintiff to submit his most recent tax return, complete banking records and records attesting to income and expenses” (Shuter, at para. 76);

(x) A corporate plaintiff who claims impecuniosity must demonstrate that it cannot raise security for costs from its shareholders and associates, i.e. it must demonstrate that its principals do not have sufficient assets (Smith Bus Lines Ltd. v. Bank of Montreal (1987), 61 O.R. (2d) 688 (H.C.J.) at 705). Evidence as to the “personal means” of the principals of the corporation is required to meet this onus (Treasure Traders International Co. v. Canadian Diamond Traders Inc. (S.C.J.) (“Treasure Traders”), at paras. 8-11). A corporate plaintiff must provide “substantial evidence about the ability of its shareholders or others with an interest in the litigation to post security”. “A bare assertion that no funds are available” will not suffice. (1493677 Ontario Ltd. v. Crain (S.C.J. - Mast.) at para. 19);

[17] The applicants have not established impecuniosity.

[18] With respect to the merits, as summarized in Coastline at para. 7(vi) and (vii):

(vi) The court on a security for costs motion is not required to embark on an analysis such as in a motion for summary judgment. The analysis is primarily on the pleadings with recourse to evidence filed on the motion, and in appropriate cases, to selective references to excerpts of the examination for discovery where it is available (Padnos v. Luminart Inc. (Gen.Div.) at para. 7; Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP (S.C.J. - Mast.) at para. 37);

(vii) “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” (Wall v. Horn Abbott Ltd. (C.A.) at para. 83);

[19] For the purposes of this motion and based on the record before me, I am not satisfied that the application has a good chance of success (Coastline at para. 7(iv)(c)). The application seeks declaratory relief regarding the ROA, which is spent and against O. Reg. 82/20, which was revoked. Today there are no COVID-19 restrictions on restaurants in Ontario. The applicants no longer operate restaurants in Ontario and can no longer contravene O. Reg. 82/20 because it has been revoked.

[20] The applicants argue that the unique circumstances of this constitutional challenge support the dismissal of this motion. Ontario courts have rejected constitutional challenge to the COVID-19 measures, including the rules respecting restaurants (Banas v. HMTQ, 2022 ONSC 999 (Ont. S.C.J.); Ontario v. Trinity Bible Chapel, 2022 ONSC 1344 (Ont. S.C.J.) (aff’d 2023 ONCA 134, leave to appeal to SCC refused, [2023] S.C.C.A. No. 168; Work Safe Twerk Safe v. Ontario (Solicitor General), 2021 ONSC 6736 (Ont. Div.Ct.); Baber v. Ontario (Attorney General), 2022 ONCA 345).

[21] While the outcome of the application may be dispositive of other proceedings between the parties, that does not equate to the within application having a good chance of success.

[22] The applicants did not comply with the above-noted costs orders of Justice Akbarali by paying costs within the ordered time. At civil practice court on September 6, 2022, Justice Centa was not prepared to schedule the application because the costs orders had not yet been paid. Justice Centa’s endorsement dated September 6, 2022, indicates that the applicant is attempting to raise money to pay the outstanding costs orders. The costs orders were payable in August 2021 and March 2022 but were not paid until January 2023.

[23] There is no evidence from the applicants explaining their delay in complying with the costs orders. The responding record contains a statement of claim in a separate action brought by Mr. Skelly alleging negligence against his former lawyer. In that statement of claim, Mr. Skelly alleges in part that his former lawyer failed to advise that the issue of payment of the December 4, 2020 fixed costs had been raised by Ontario and that there was a failure to provide a response to Ontario’s request for payment as a result. These are allegations only and, in any event, do not address the failure to pay the costs order of Justice Akbarali dated July 13, 2021, within 30 days or the failure to pay the costs order of Justice Akbarali dated February 1, 2022, once that order came to the applicants’ attention.

[24] There is no evidence of prejudice to the applicants if the order sought is made. There is no evidence that an order for security for costs would prevent the application from proceeding.

[25] Considering the justness of the order sought holistically, in all of the circumstances of this matter, I am satisfied that it is just that an order for security for costs is granted.

[26] With respect to the quantum of security for costs, in my view the all-inclusive amount of $30,000.00, which includes an estimated 3-day hearing, is a fair and reasonable amount. The amount of $30,000.00 for security for costs shall be paid into court to the credit of this action within 60 days of today’s date.

[27] Ontario is successful on the motion and is entitled to costs. Ontario seeks costs of the motion in the all-inclusive amount of $2,000.00 payable within 30 days. The applicants do not oppose the quantum of costs sought for the motion but ask for 60 days to pay. Costs of this motion are fixed in the all-inclusive amount of $2,000.00 payable by the applicants to Ontario within 60 days.

[28] Order to go as follows:

1. The applicants shall within 60 days of today’s date pay into court to the credit of the application the amount of $30,000.00 as security for Ontario’s costs.
2. The costs of this motion are fixed in the all-inclusive amount of $2,000.00 payable by the applicants to Ontario within 60 days of today’s date.

Associate Justice B. McAfee Date: November 20, 2023