Court File and Parties
2026 ONSC 2883
MOTION HEARD: 20260122
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 2384331 Ontario Inc. and Cham Shan Temple, Plaintiffs, Defendants to the Counterclaim
AND:
Shandong Haiwei Decoration Engineering Co., Ltd and Jian Ming Chen, also known as Chan Jien Ming, Defendants, Plaintiffs by Counterclaim
BEFORE: Associate Justice B. McAfee
COUNSEL: E. Turkienicz, Counsel, for the Plaintiffs, Defendants to the Counterclaim
R. He, Counsel, and Y. He, Articling Student, for the Defendants, Plaintiffs by Counterclaim
HEARD: January 22, 2026
Reasons For Decision
1This is a motion brought by the plaintiffs and defendants to the counterclaim 2384331 Ontario Inc. (238) and Cham Shan Temple (Cham Shan) (collectively the defendants to the counterclaim) for an order requiring one of the two defendants and plaintiffs by counterclaim Shandong Haiwei Decoration Engineering Co. Ltd. (Haiwei), to post security for costs with respect to Haiwei’s counterclaim in this action through to the end of examinations for discovery. No security is sought with respect to the counterclaim of the defendant and plaintiff by counterclaim Jian Ming Chen, also known as Chan Jien Ming (Chen).
2The motion is opposed. Haiwei and Chen request that the motion be dismissed.
3This action is one of two actions ordered, on consent, to be tried together. An overview of the actions, the parties and the pleadings is set out in my reasons for decision on a separate motion brought in the within action and in the companion action Cham Shan Temple v. Chen, CV-23-00711208-0000 (see 2384331 Ontario Inc. v. Shandong Haiwei Decoration Engineering Co., Ltd, 2025 ONSC 6855). I now have a reply and defence to counterclaim in the within action before me.
4On this motion the defendants to the counterclaim rely on Rule 56.01(1)(a) and (d) of the Rules of Civil Procedure:
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;…
5Rule 1.04(1) is also applicable:
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
6The application of Rule 56.01(1) involves a two-step analysis. The first step of the analysis requires the defendants to the counterclaim to establish that it appears that one of (a) or (d) is satisfied. If the defendants to the counterclaim discharge their initial onus, the second step of the analysis requires the plaintiff by counterclaim Haiwei to establish the basis for a broad flexible exercise of discretion that an order for security for costs would be unjust (Coastline Corporation Ltd. v. Canaccord Capital Corporation, [2009] O.J. No. 1790 (Ont. S.C.J.) at para. 7; Musitano v. Gordon, 2023 ONSC 5587 (Ont. S.C.J.) at paras. 20, 40-41).
7Corporations are not immune from Rule 56.01(1)(a). Indicia of residency include place of incorporation, location of head office or office space, the existence of active business in Ontario, and location of assets (Ascent Incorporated v. Fox 40 International Inc. (Ont. S.C.J.) at para. 5).
8As set out in the statement of defence and counterclaim, Haiwei pleads that it is a corporation incorporated in the People’s Republic of China and carries on business as a construction contractor exclusively in China, with the sole exception of the construction project at issue in this action (para. 5 of the statement of defence and counterclaim). I am advised that Haiwei’s involvement in the construction project is complete. Haiwei pleads that it has never had a corporate bank account, office or business presence in Canada (para. 6 of the statement of defence and counterclaim).
9I am satisfied that based on Haiwei’s own pleading, it appears that Haiwei is ordinarily resident outside of Ontario. It is not necessary for me to determine whether Rule 56.01(1)(d) is also applicable.
10The onus now shifts to Haiwei to satisfy the court that an order for security for costs would be unjust.
11In Yaiguaje v. Chevron Corporation, 2017 ONCA 827 (C.A.) at paras. 23-25, the Court of Appeal states as follows with respect to consideration of the justness of the order (see also Paramount Franchise Group v. Mian, 2022 ONSC 4533 (Ont. S.C.J.) at para. 4):
[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. See: Hallum v. Canadian Memorial Chiropractic College (1989), 70 O.R. (2d) 119, [1989] O.J. No. 1399 (H.C.J.); Morton v. Canada (Attorney General) (2005), 75 O.R. (3d) 63, [2005] O.J. No. 948 (S.C.J.); Cigar500.com Inc. v. Ashton Distributors Inc. (2009), 99 O.R. (3d) 55, [2009] O.J. No. 3680 (S.C.J.); Wang v. Li, [2011] O.J. No. 3383, 2011 ONSC 4477 (S.C.J.); and Brown v. Hudson’s Bay Co., [2014] O.J. No. 795, 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
12Haiwei submits that an order for security for costs would be unjust for two reasons. Haiwei argues that its principal, the defendant and plaintiff by counterclaim Chen, has provided a guarantee and undertaking which ought to be considered sufficient to discharge any concern regarding the enforceability of any potential costs award against Haiwei. Haiwei also argues that the counterclaim is substantially a defence to the main action.
13The defendants to the counterclaim submit that the guarantee and undertaking should not be accepted as sufficient and that the counterclaim is much broader in scope than a defence to the main action.
14At paragraph 3 of Chen’s affidavit sworn January 31, 2025, Chen states:
- While I understand that costs are generally awarded on a joint and several basis, I hereby personally guarantee and undertake to pay any costs order awarded against Haiwei in this action, including the counterclaim.
15In Printing Circles v. Compass Group Canada Ltd., [2007] O.J. No. 5066 (Ont. S.C.J.) at para. 43, Justice Corbett addresses the issue of the sufficiency of an undertaking:
[43] Where a personal guarantee is offered, the moving party may challenge the sufficiency of the undertaking, just as a financial institution would not accept a personal guarantee without inquiring into the creditworthiness of the guarantor. Thus the proposed guarantor should adduce some evidence to establish that there is substance to the guarantee, and the moving party may challenge the sufficiency of the guarantee in its own evidence, and by way of cross-examination.
16Chen has provided no evidence of his ability to pay costs including evidence of his current financial situation and the availability of assets owned by him in the jurisdiction. The defendants to the counterclaim cannot be blamed for not cross-examining Chen on his affidavit to obtain evidence to fill in the gaps in Chen’s evidence.
17Based on the limited evidence before me, I am not satisfied that it would be unjust to make an order for security for costs based alone on the personal guarantee and undertaking already given by Chen.
18The statement of claim pleads issues concerning the construction agreement entered into in November 2021 (the Contract), the fire on July 24, 2022, and the settlement agreement signed on August 15, 2022, and affirmed on August 31, 2022 (the Settlement Agreement).
19One of Haiwei’s defences to the allegations concerning the disputed breach of the Settlement Agreement is that it is the plaintiffs who are in breach of amounts owing under the Contract and an oral agreement to pay those amounts (the Oral Agreement). The issue of the Haiwei Worker Visas is raised in the defence in part in response to paragraphs 7 and 8of the statement of claim.
20In their reply, the plaintiffs deny any monies owing under the Contract, Settlement Agreement or for past unpaid invoices and denies any Oral Agreement.
21Haiwei’s counterclaim seeks a declaration that the plaintiffs/defendants to the counterclaim are in breach of the Contract and Oral Agreement and a declaration that the Settlement Agreement is void and seeks damages for breach of contract. Haiwei’s counterclaim is connected to both the statement of claim and its defence to the claim. Adjudication of Haiwei’s counterclaim will involve and require factual findings on substantially the same circumstances giving rise to the claim and Haiwei’s defence to the claim.
22In Paramount Franchise Group v. Mian, 2022 ONSC 4533 (Ont. S.C.J.) Justice Penny states as follows at para. 11 (see also Toronto-Dominion Bank v. Szilagyi Farms Ltd., [1988] O.J. No. 1223 (C.A.) at para. 21):
[11] It is well established that “no party should have to give security for costs as a condition of defending itself”. Our court has declined to award security for costs in cases involving a “substantial coincidence” between the alleged facts that constitute the defence and those that support the counterclaim: ICC International Computer Consulting & Leasing Ltd. v. ICC Internationale Computer and Consulting GmbH, [1989] OJ No. 70 at p. 3. Where the facts on which a counterclaim is based are in large part the same facts and circumstances raised in the plaintiff’s claim, this militates against an order for security for costs. European Flooring Contract Services Ltd. v. Toddglen ILofts et al., 2013 ONSC 6445 at para. 33.
23The close connection between the counterclaim and the statement of claim militates against the exercise of the court’s discretion to award security for costs with respect to Haiwei’s counterclaim.
24Considering the justness of the order sought holistically, I decline to exercise my discretion to order security for costs. The motion is dismissed.
25With respect to the issue of costs of this motion, if successful in opposing the motion Haiwei sought costs on a partial indemnity basis in the all-inclusive amount of $10,203.90. If successful on their motion the defendants to the counterclaim sought costs on a partial indemnity basis in the all-inclusive amount of $6,518.88 (amount in the costs outline plus $500.00 for attendance on the motion).
26Haiwei was successful in opposing the motion and is entitled to costs. In my view a fair and reasonable amount that the defendants to the counterclaim could expect to pay for costs is the all-inclusive amount of $7,000.00, payable to Haiwei within 30 days.
27Order to go as follows:
The motion is dismissed.
Costs of the motion are fixed in the all-inclusive amount of $7,000.00 payable to Haiwei by the defendants to the counterclaim within 30 days.
Associate Justice B. McAfee
Date: May 19, 2026