• by Amruta Ponkshe
Originally published in the OFLM 2024-12 edition
Overview
Seeking security for costs is an available yet under-utilized recourse within the Ontario family law framework.
As we all know, family law litigation can be lengthy and expensive. Therefore, if a party anticipates an award for costs at the end of a trial, it is likely that they will want assurances that the other party will be able to pay them. This is where a claim for security for costs comes into play.
This article discusses the legal framework and general principles for seeking security for costs for a motion or a trial. It also highlights Mooney v. Mooney (2024 ONSC 4586) and Alami v. Haddad (2024 ONCA 300), two recent Ontario decisions that summarized and applied the legal principles.
In Mooney the wife was not successful in her claim of security for costs of $150,000. However, Justice de Sa ordered the husband to pay $5,000 should he decide to bring any further motion prior to trial. He also ordered $9,000 in costs due to, in part, the husband’s conduct throughout the proceedings.
In Alami, the husband brought a motion before the Court of Appeal seeking $25,000 in security for his anticipated costs of the appeal brough by the wife. He claimed that the wife’s appeal was frivolous and vexatious because it was devoid of merit, and that she had insufficient assets to pay his costs if she was unsuccessful. In dismissing the claim, the Court found no evidence that the wife brought the appeal to annoy or harass the husband or that her pursuits were in bad faith. The Court also found that the wife’s one-half interest in the matrimonial home would be sufficient to satisfy the appeal costs.
The legal framework
The family law regime in Ontario falls under the umbrella of the civil litigation system. This is true especially with respect the legal scheme for security for costs. In addition to the Family Law Rules, judges usually rely on the Rules of Civil Procedure when discussing security for costs.
Family Law Rules
Subrules 24(13) to 24(16) and 38(26) of the Family Law Rules discuss orders for security for costs.
A judge may, on motion, make an order for security for costs that is just, based on one or more of the following factors:
- A party habitually resides outside Ontario.
- A party has an order against the other party for costs that remains unpaid, in the same case or another case.
- A party is a corporation and there is good reason to believe it does not have enough assets in Ontario to pay costs.
- There is good reason to believe that the case is a waste of time or a nuisance and that the party does not have enough assets in Ontario to pay costs.
- A statute entitles the party to security for costs. (Rule 24(13)) (emphasis added)
A judge making an order for security for costs has the power to determine the amount of the security, its form and the method of giving it (Rule 24(14)).
Until the security has been given, a party against whom there is an order for security for costs may not take any step in the case, except to appeal from the order, unless a judge orders otherwise (Rule 24(15)).
Failure to give security as ordered can result in the party’s case be dismissed or their pleadings being struck (Rule 24(16)).
With respect to appeals, on a motion by the respondent for security for costs, the court may make an order for security for costs that is just, if it is satisfied that,
(a) there is good reason to believe that the appeal is a waste of time, a nuisance, or an abuse of the court process and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;
(b) an order for security for costs could be made against the appellant under subrule 24 (13); or
(c) for other good reason, security for costs should be ordered. (Rule 38(26)) (emphasis added)
Rules of Civil Procedure
Several parts of the Rules of Civil Procedure deal with security for costs.
Rule 20.05(2) confirms that if an action is ordered to proceed to trial, the court may give such directions or impose such terms as are just, including an order for security for costs. Rule 20.05(6) indicates that where a party fails to comply with an order for payment for security for costs, the court on motion of the opposite party may dismiss the action, strike out the statement of defence or make such other order as is just.
Rule 56 of the Rules of Civil Procedure is the foundation for the framework of rules about security of costs available within the Family Law Rules. Particularly, subrule 56.01(1) is similar to Family Law subrule 24(13) and Civil subrule 61.06 addressing appeals is similar to Family Law subrule 38(26). One of the main differences is the choice of language from “waste of time” and a “nuisance” to the use of the terms “frivolous” and “vexatious”.
Guiding Principles
- 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…: (Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at para. 23 (emphasis added))
- The party seeking security for costs must prove on a balance of probabilities that there is good reason to believe that the appeal is frivolous and vexatious and that the other party has insufficient assets in Ontario to pay the costs of the appeal. The “good reason to believe” standard requires the motion judge to reach only a tentative, not a definitive, conclusion on the absence of merit or assets (Agboola v. Unoh, 2023 ONSC 5129, at para. 34 (emphasis added))
- 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. (Yaiguaje (above) at para. 22 (emphasis added))
- Both sets of rules (Civil Procedure and FLR) contemplate that the form of security to be provided is to be crafted on a case-specific basis, to meet the particular exigencies of the case. (Clark v. Clarke, 2014 ONCA 175 at para. 46 (emphasis added))
Mooney v. Mooney (2024 ONSC 4586)
In Mooney, Justice de Sa heard a motion brought by the wife seeking that the husband post security for costs in the amount of $150,000 in advance of an anticipated three-week trial. She argued that the husband’s approach to litigation, his evident delay tactics, his previous outstanding costs awards and his impecuniosity warranted an order for security for costs.
The husband submitted that he did not have any assets available to post security given his financial circumstances. He was on ODSP and had no funds other than his share of the funds held in trust from the sale of the matrimonial home. The husband submitted that his share of the sale proceeds was sufficient to cover any costs from the trial.
The wife’s position was that the husband’s share of the sale proceeds was earmarked for occupational rent, child support and other necessary reimbursements to her. She requested leave to proceed with a summary judgement motion or uncontested trial if the husband failed to post security for costs.
Justice de Sa referenced Hodgins v. Buddhu (2013 ONCJ 137) and held that in making an order under Rule 24, the court must apply the following analysis:
- The initial onus is on the party seeking security for costs to show that the other party falls within one of the enumerated grounds.
- If the onus is met, the court has discretion to grant or refuse an order for security.
- If the court orders security, it has wide discretion as to the quantum and means of payment of the order. Clark v. Clark (2014 ONCA 175)
- The order must be “just” and be based on one or more of the factors listed in subrule 24(13). (emphasis added)
His Honour also reiterated Justice Katarynych’s narrative in McGraw v. Samra (2004 ONCJ 164):
... The “security for costs” remedy is but one of a number of remedies provided by the rules to stop a case in its tracks until the party veering outside of the rules brings himself or herself into line with them. It is a control on a blithe pursuit of another person in the courts without attention to the merits of the pursuit and the legal costs likely to be incurred by the respondent to defend the case. It is a remedy built on the principle that court proceedings are expensive and time consuming and not to be launched frivolously or without due regard to the impact on the responding party ...
.. As a brother judge has recently pointed out, court proceedings are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and oblivious to the mounting costs of the litigation… (at paras. 24-25)
Justice de Sa considered that on one hand, there were real concerns that the wife would be left without compensation for her costs at the end of the trial if she succeeded. Further, while the husband had retained new counsel, he had a history of discharging counsel which would inevitably protract matters and create unnecessary delays.
On the other hand, the husband did not have sufficient funds to post security, and it would not be right to prevent him from presenting his case on its merits (in the event that his pleadings were struck due to failure to post security). The husband had acknowledged that he had issues keeping matters on track when he was not represented. However, de Sa J. had confidence that the husband would make concerted efforts to keep the matter on track.
Ultimately, the court did not order the husband to post security for costs in the amount of $150,000. However, at paragraphs 24 and 25 of the decision, his Honour ordered that if the husband wished to bring any further motion prior to trial, he would be required to post security in the amount of $5,000, or alternatively require leave of the Court. His Honour also ordered that the outstanding costs owed to the wife would be paid from the parties’ joint account.
Notably, the above motion was followed by a cost decision (2024 ONSC 6156) with Justice de Sa noting that he did not make an order for security for costs so as to permit the husband to advance his position at trial. However, the court still found the wife to be the successful party and ordered the husband to pay $9,000 in costs on a partial indemnity basis. The court reasoned in part that the wife’s offer to settle was similar to the order made and the Applicant's conduct throughout the proceeding required a motion of this nature to be brought.
Alami v. Haddad (2024 ONCA 300)
In this motion before the Court of Appeal, the husband sought security for his costs of the appeal brough by the wife from the order of Justice Bruhn, relying on subrules 61.06(1) (a), (b) and (c) of the Rules of Civil Procedure. Specifically, he asked the that the wife be required to post $25,000 as security for his costs and pay the outstanding costs orders as a condition of her being permitted to continue with her appeal.
The husband submitted that there was good reason to believe that the wife’s appeal was frivolous and vexatious because it was devoid of merit, and she had insufficient assets to pay his costs of the appeal if she was unsuccessful. He highlighted her failure to pay outstanding costs orders that were not related to her appeal.
Justice Roberts referenced paragraph 33 of York University v. Markicevic (2017 ONCA 651) where the court confirmed that the criteria under subrule 61.06(1) (a) of the Rules of Civil Procedure are conjunctive.
Her Honour explained that for the husband to be granted security for costs, he would have to satisfy all of the criteria: there had to be good reason to believe that the wife’s appeal was frivolous and vexatious and that she had insufficient assets in Ontario to pay the costs of the appeal.
Was the wife’s appeal frivolous and vexatious?
Before answering this question, the Court discussed what “frivolous” and “vexatious” mean in this context.
Justice Roberts referred to paragraphs 19 and 25 of Lavallee v. Isak (2022 ONCA 290) where the court discussed that a frivolous appeal is one devoid of merit and with little prospect of success, and a vexatious appeal is one that is brought to annoy or harass and is conducted in a vexatious or “less than diligent” manner, or is pursued in bad faith or for an oblique purpose.
The Court analysed the wife’s main grounds of appeal and discussed that the wife had essentially challenged the application judge’s findings of fact without identifying errors in principle or palpable and overriding errors that would permit appellate interference. The Court was of the opinion that given the deference generally owed to the application judge’s findings of fact, the wife faced a stiff uphill battle on her appeal. The likelihood of the wife’s appeal being successful is low.
However, as her grounds were nevertheless arguable, Justice Roberts could not say that the appeal was so devoid of merit that it is frivolous.
The Court was also not persuaded that the wife’s appeal was vexatious. The wife was exercising her right to appeal and had conducted her appeal in accordance with the Family Law Rules. There was no evidence that she brought the appeal to annoy or harass the husband and there was no evidence that she was pursuing her appeal for a bad faith or oblique purpose.
Did the wife have insufficient assets in Ontario to pay the costs of the appeal?
The Court was also not convinced that the wife had insufficient assets in Ontario to pay the appeal costs. The wife’s one-half interest in the matrimonial home would have been sufficient to satisfy the appeal costs once the home was sold.
The analysis then turned to subrule 61.06(1) (b) of the Rules of Civil Procedure which allows for an order for security for costs of an appeal to be made if it could be made against a party under subrule 56.01(discussed above). In discussing the implications of subrule 56.01(a)(c), the Court held that the husband had the protection provided by the wife’s one-half share of the home for the outstanding costs orders and appeal costs if awarded.
Finally, the Court considered subrule 61.06(1)(c) that allows an order for security for costs to be made “for other good reason”. Justice Roberts discussed two cases.
In Heidari v. Naghshbandi (2020 ONCA 757), the Court of Appeal held that:
…Although the list of reasons justifying security under this residual category is not closed, the “other good reason” must be: (1) consistent with the purpose for ordering security – namely, that the respondent is entitled to a measure of protection for costs; and (2) fairly compelling, because the residual category is only engaged where the respondent cannot meet the requirements of rr. 61.06(1)(a) or (b)... (at para. 23)
In Henderson v. Wright (2016 ONCA 89), the Court commented on the other reason:
This “good reason” balances the need to ensure an appellant is not denied access to the courts, with the respondent’s right to be protected from the risk the appellant will not satisfy the costs of the appeal. (at para. 28)
In reaching a decision, at paragraph 13 of the decision, Justice Roberts restated that that an order for security for costs is discretionary. Her Honour commented the husband’s strongest argument in favour of security for costs from the wife was that the wife’s appeal appeared to be weak. Ultimately, the Court did not order security for costs.
Conclusion
As noted in Covell v. Covell (2024 ONSC 4622):
The main purpose of an order for security of costs is to protect a party from nuisance or irresponsible litigation, conducted without regard to the merits of the case or the costs likely to be incurred and that security for costs is not intended as a roadblock for a person who has a genuine claim. (at para. 13) (emphasis added)
The framework for security for costs under both the Family Law Rules and the Rules for Civil Procedure introduces checks and balances. On the one hand, it provides protection against oblique and litigious tendencies of parties who have disregard for the strain of their actions on other party’s financial resources. It also safeguards a party’s right to obtain costs in situations where the other party is unlikely of being unable to party costs awarded against them. On the other hand, the framework sets a high threshold to ensure that the provision for security for costs does not impede the right of litigants to be heard and to defend themselves.
While the analysis is case-specific, the above summary of applicable rules and recent cases should be a starting point for lawyers assisting clients in seeking security for costs.