Library:
Security for Costs Ordered on Appeal
Published in the July 2009 issue of Litigation Notes - View Article
Ontario Court of Appeal finds that the basis for ordering security for costs at the appeal stage differs from that which applies prior to trial
The Ontario Court of Appeal recently released an interesting decision on the subject of security for costs. In the October 2008 edition of Litigation Notes, we reported on the case of Unique Labelling Inc. v. Gerling Canada Insurance Company (“GCAN”). Unique Labelling Inc. (“Unique”) is an American Company that supplied bottled water to a grocery chain in the United States. Unique’s relationship with the grocery chain was terminated by reason of contaminants being found in the bottled water. Unique sued the supplier of the bottles, Triumbari Containers Ltd. (“TCL”), an Ontario company operated by Dominic Triumbari. Unique also sued Triumbari himself and Cynar Dry Company (“Cynar”) a bottling facility located in Ontario.
Unique obtained a judgment in Oregon for about $1.5 million dollars but was unable to recover anything from the Ontario defendants. Consequently, it commenced an action against the insurers of TCL, Triumbari and Cynar in Ontario. That action was resisted on the basis that the unsatisfied judgment provisions of the Ontario Insurance Act only allow recovery in the event of liability for injury or damage to the “person or property of another”. The claim by Unique was for economic loss and did not relate to damage to the person or property of another. This is the case on which we reported in the Litigation Notes of October 2008.
Unique appealed the dismissal of its action to the Ontario Court of Appeal. The Insurers brought a motion, seeking security for the costs of the appeal. They asked for about $490,000 as security for costs, on the basis that Unique did not have any assets in Ontario which could satisfy an ultimate costs award in their favour.
Unique argued that the question of security for costs was res judicata, because Unique had brought an unsuccessful motion for security for costs prior to trial. On that occasion the Master who heard the motion concluded that Unique was impecunious and that an order to post security for costs would prevent it proceeding with the action. The Insurers claimed that the reason the Master granted the motion was that they had failed to cross-examine Unique on its affidavit evidence in support of its impecuniosity. In any event, the Court of Appeal ruled that the matter was not res judicata. The reason was that there is a difference between a motion for security for costs prior to trial and one at the appeal stage. Prior to trial the likelihood of success is difficult to assess and the motion is considered largely on the pleadings. At that stage there is generally no reason to doubt that the Plaintiff will succeed and obtain an award of damages and costs in its favour.
In this case, the trial had already taken place, the Insurers had been successful and been awarded costs of close to $400,000 following the trial. In order for Unique to have its day in court, the Insurers had already expended considerable time and money and should not be called upon to invest more time and money without the possibility of recovering any of their costs in the event of Unique’s appeal being unsuccessful.
The Court went on to hold that the Plaintiff had the burden of demonstrating that it had no access to funds for the purpose of posting the security for costs. In this case there were corporate shareholders who stood to benefit from any eventual judgment and who appeared to have access to considerable resources. In addition, the Court of Appeal noted most of Unique’s grounds for appeal related to alleged factual errors made by the trial judge. Given the deference accorded findings of fact made by a trial judge, Unique had a significant challenge ahead of it in proceeding on the appeal. Even if it were successful, the likelihood would be that a new trial would have to be ordered. The Court of Appeal therefore ordered that security for costs be provided in the amount of $120,000.
Unique Labeling Inc. v. GCAN Insurance Company, 2009 ONCA 591 (CanLII)