Security for costs is commonly requested in litigation matters, particularly before proceeding to an appeal. If the defendant in a matter has been awarded costs at a previous step in the litigation process that remain largely unpaid, they are permitted to request an order that the plaintiff must post security for the amount owed before taking further steps in the litigation process. This can be particularly helpful in cases where the defendant feels the matter is vexatious, or without merit, as it will either provide the defendant with the peace of mind of knowing that the funds have been secured or discourage the plaintiff from moving ahead if they are unable to post the necessary security.

However, security for costs is less commonly sought in class action proceedings. Despite the infrequent use of such an order, it can be an excellent means of shutting down a case with little merit before it proceeds to an appeal.

Security for Costs, Generally

An order for security for costs requires a plaintiff to demonstrate it has the funds necessary to pay any existing costs orders in place before a matter can proceed to the next step. Typically, a plaintiff will be required to pay the funds into court to satisfy the order. The threshold and other factors pertaining to security for costs are set out in Rule 56.01 of the provincial Rules of Civil Procedure. The section states that a court has the discretion to make an order for security for costs in any of the following circumstances:

1. The plaintiff is ordinarily resident outside of Ontario.
2. The plaintiff has another proceeding pending in Ontario or elsewhere for the same relief.
3. The defendant has an order for costs against the palintiff in the same or a different proceeding, which has largely gone unpaid.
4. The plaintiff is a corporation or a nominal plaintiff and there is good reason to believe the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.
5. There is good reason to belive that the action is frivolous and/or vexatious, and the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.
6. The defendant is entitled to security for costs by statute.

Recent Amendments to the Class Proceedings Act Pertaining to Security for Costs

In October 2020, the Class Proceedings Act was amended in several ways. One of the amendments specifically addressed the notion of class proceedings that are funded by a third party. Under s. 33.1(12), defendants are entitled to seek security for costs against third-party funders of class proceedings if the following criteria are satisfied:

• An indemnity has been provided for costs under an approved third-party funding agreement; and
  • The funder is not ordinarily resident in Ontario;
  • The defendant has an order against the funder for costs in the same or a different proceeding that remain unpaid in full or in part; or
  • There is good reason to believe the funder has insuffient assets in Ontario to pay the costs of the proceeding.

With security for costs being addressed directly in the Class Proceedings Act for the first time, it may open the door for more class-action defendants to make use of this option going forward, as the defendant in the case below recently did.

Defendant in Class Proceeding Awarded Security for Costs Against Plaintiffs

In a recent class proceeding before the Ontario Superior Court, Endean et al, Lind et al v. St. Joseph’s General Hospital, the defendant hospital successfully brought a motion for security for costs. In this case, the plaintiffs had brought a claim against the defendant hospital in 2016. The court found for the defendant because the plaintiffs were out of time for their claim. The court also awarded costs for the proceeding in the defendant’s favour. The plaintiffs then unsuccessfully appealed the matter to the Court of Appeal in 2019.

The plaintiffs then brought a motion to reopen the case before the Superior Court of Justice, in order to introduce fresh evidence. In response, the defendant hospital filed a motion for security for costs, as the costs owing to the defendant had largely gone unpaid. Between the two groups of plaintiffs, the defendant was owed a total of $365,800.37, but had only collected $5,136.81.

The court granted the motion for security for costs. Firstly, the previous costs awards were mostly unpaid. Secondly, the court found that the plaintiffs had little chance of success in their motion to reopen the trial, based on a review of the evidence presented:

[T]he material before me on this motion fails to demonstrate that the Plaintiffs’ motion has a good chance for success. The motion materials put forward by these plaintiffs has the tone of an attempt at a “do over” of a type that is not to be encouraged under the Rules of Civil Procedure.  A “do over” is different than a reopening of a trial with fresh evidence. It is an attempt to re-argue the same points under the guise of something new which in fact is not new at all.

Seek Advice From Experienced Litigation Counsel

Issues relating to litigation can become extremely complicated. Orders for security for costs are dependent on a number of factors and the chance of success of obtaining such an order can vary drastically from case to case, particularly in class proceedings. However, as the case above demonstrates, a request for security for costs can be an excellent aid in helping a defendant in a class action put a stop to ongoing proceedings that have little merit. It is always best to ensure that you have representation who can provide you or your business with experienced and knowledgeable guidance through all aspects of the litigation process.

Contact Milosevic & Associates in Toronto for unparalleled representation in even the most complex corporate and commercial disputes. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online for a consultation.