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When can a defendant seek further security for costs?

Courts may order a plaintiff to pay money into court in certain prescribed situations as security for the defendant’s anticipated costs of the litigation. This is available to a defendant in circumstances where there is a likelihood that a defendant will have difficulty recovering costs from a plaintiff at the end of the litigation if the plaintiff loses and is ordered to pay costs to the defendant.1 To obtain such an order, the defendant must bring what is called a “motion for security for costs”.

Usually the court will order that security be posted in stages and will base the amount on estimates of the costs that are expected to be incurred in the litigation. In certain circumstances, the defendant will have grounds to go back to court and request further security for costs to increase the amount that the plaintiff must pay into court. The principles that a court will consider on a motion for further security for costs was addressed in the recent Ontario Superior Court decision in Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, 2021 ONSC 978 (“Spot Coffee”).2 By way of disclosure, our firm represented the plaintiff in this matter.

Before we review the Spot Coffee decision, let’s review some basics about motions for security for costs. Rule 56.01 of the Rules of Civil Procedure outlines certain situations in which plaintiffs may be required to pay security for costs. These include situations where:

  • the plaintiff resides outside Ontario;
  • there are multiple proceedings;
  • the defendant has a costs award against the plaintiff that remain unpaid;
  • the plaintiff is a corporation or a nominal plaintiff without sufficient assets in Ontario to pay the defendant’s costs;
  • the plaintiff’s action is frivolous and vexatious and the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.

Pursuant to Rule 56.07, courts may increase or decrease previous amounts ordered for security for costs. This is because, in some cases, hindsight reveals that the amount the plaintiff was ordered to pay as security was not sufficient. Litigation often evolves, unforeseen disputes within the litigation develop, and strategies change. Defendants are therefore permitted under Rule 56.07 to seek further security for costs from the court in certain circumstances.

The Spot Coffee decision is a good example of a court considering the unique principles in determining a motion for further security for costs. In Spot Coffee, the defendant brought its motion for further security for costs shortly before the commencement of trial. In considering the defendant’s motion, Master McGraw noted that the following principles were relevant to considering the defendant’s motion for further security for costs:

  • a second motion for security for costs will not succeed unless there is an unforeseen and material change in circumstances since the first order for security. An example of an unforeseen and material change in circumstances might be where a plaintiff has come into a sum of money sufficiently large that they could no longer make an impecuniosity argument;
  • the defendant seeking increased security bears the onus of demonstrating a significant gap between the security ordered and the actual expenses which were not foreseeable and that in hindsight the original request for security for costs was based on an assessment of the complexity of the case which hindsight has established was not realistic; and
  • the jurisdiction to increase or decrease the amount of security already ordered should not be exercised lightly or be used to second guess the court that made the original order, whether on consent or otherwise, unless the gap between what was ordered and what later appears to be necessary is significant.

The court in Spot Coffee also noted that courts are required to consider the justness of granting a further security for costs order, with the interests of justness at the forefront. Citing the Court of Appeal for Ontario in Yaiguaje v. Chevron Corporation, 2017 ONCA 827 (“Chevron”), the court noted the following factors should be considered in determining the justness of an order:3

  • 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.

The Court of Appeal in Chevron qualified the above-noted list by holding that each case must be considered on its own facts. According to Chevron, “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”.4

The court in Spot Coffee dismissed the defendant’s motion for increased security. The court was not persuaded that the defendant had put forward sufficient evidence to show that a material and unforeseen change in circumstances in the litigation existed to warrant the increase in security, nor did the defendant show any significant gap between the first order for security for costs and the defendant’s actual expenses that was unrealistic in hindsight. Further, the court found that the defendant’s delay in bringing the motion without reasonable explanation further supported the motion’s dismissal.5

Defendants seeking to “top up” their security for costs order against the plaintiff should therefore proceed with caution. If they wish to successfully obtain further security, they should come prepared with good evidence that there has been an unforeseen and material change in circumstances since the first order for security that warrants an increase in security for costs. The gap between the order for security and the defendants’ actual expenses should be both significant and not foreseeable at the time that the original order for security for costs was granted.

Further, even if the defendant can successfully show a material change in circumstances and consequent unforeseen increase in expenses, the motion for further security may be dismissed if the court does not consider it “just” to grant further security for costs, with the court considering the principles enumerated in Chevron.

Footnotes
  1.   In Ontario there is a general rule of litigation that “loser pays”. See our firm’s blog “Liability for Legal Fees in Estate Matters”.
     
  2.   See Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, 2021 ONSC 978.
     
  3.   Spot Coffee at para 8, citing Chevron at paras 23 – 25.
     
  4.   Spot Coffee at para 8, citing Chevron at para. 25.
     
  5.   Spot Coffee at paras 16 and 17.
     
Peter Neufeld

Peter Neufeld

The author of this blog is Peter Neufeld. Peter is an associate at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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