Security For Costs Motions

Dealing with a car accident lawsuit is stressful enough as it is. Insurance may be denying your claim for benefits and you may be getting push back from the defendants about who is at fault for the accident or about the extent of your injuries.

To add another layer of complexity, if you have been involved in a car accident in Ontario, but you do not live in Ontario, you may be faced with what is called a “motion for security for costs”.

In Ontario, the court system goes by the rule of “loser pays”. This means that if you are a plaintiff to a lawsuit in Ontario and you lose that lawsuit, you could be found liable to pay a portion of the legal costs of the defendant. If you do not live in Ontario, the defendants could be worried about how they will be able to enforce an order for costs since you not living in Ontario could pose a problem to having a court enforce it.

Accordingly, a defendant could seek an order for security for costs. This means that you could be ordered by a court to pay a sum of money into court so that if you lose the lawsuit, the other side is guaranteed at least some of the costs that you may be ordered to pay.

The Rule that addresses these motions in Ontario is Rule 56 in the Rules of Civil Procedure. The Rule states:

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;

(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;

(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;

(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;

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or

(f) a statute entitles the defendant or respondent to security for costs.

This blog post will focus on some, but not all, of the ways you may be able to get the defendant’s motion for security for costs dismissed.

1. Not living in Ontario does not mean you are “ordinarily resident outside Ontario”

Being “ordinarily resident outside Ontario” does not always mean the same thing as “living outside of Ontario”. You may be living out of Ontario temporarily, or you may have moved permanently but still maintain significant ties to the province so that you may not meet the definition of being “ordinarily resident outside Ontario”.

This was explored in the case of MacKinnon v. A.J. Bus Lines Ltd., 2010 ONSC 2802.

In this case, a motion for security for costs was brought by the defendant on the basis that the plaintiff was living in the Philippines. The fact that the plaintiff was living in the Philippines was undisputed by either party to the action.

Nevertheless, Price J., dismissed the defendant’s motion requesting security for costs on the basis that the plaintiff was a recipient of ODSP which means that “he has a strong financial incentive to be outside Ontario for only so long as the exceptional circumstances…and then to resume his residence in the Province” [see para 30].

Moreover, Price J., concluded this issue stating:

The defendants must satisfy the onus on them to establish that the plaintiff is ordinarily resident outside Ontario "on the basis of 'proven facts' rather than 'mere conjecture, hunch or speculation'." While there is no dispute that the plaintiff is living in the Philippines, the evidence does not satisfy me on a balance of probabilities that he is ordinarily resident there. [see para 31].

The burden of proof is on the defendant to prove that you are not “ordinarily resident of Ontario”. If you can show you maintain significant ties to the province, you may be able to be considered as ordinarily resident in Ontario despite not actually living there.

2. You have “adverse costs insurance”

Many plaintiffs choose to purchase a “adverse costs insurance” policy that is supposed to provide them with some peace of mind if they are ordered by a court to pay costs to the defendants’ lawyers. The position established by the case law is that the presence of this insurance is not a conclusive way to avoid a security for costs order, but is something that should be considered and given weight in favour of the plaintiff.

In Frantz v. NB Thrilling Films 4 INC. et al., 2017 ONSC 4637, T. Hackland J., adjudicating on a security for costs motion brought by the defendants, held at para 18 that:

the ATE policy furnished by the DAS Legal Protection Company will be accepted as security for the defendants' costs in lieu of payment into court.

In Alary v Brown, 2015 ONSC 3021, Robert J. Smith J., adjudicating on a security for costs motion brought by the defendants, held that the presence of a valid ATE policy was given weight in his decision to dismiss the defendant’s motion.

The problem with adverse costs insurance when it comes to these kinds of motions, is that there is no way for the defendant to guarantee that this insurance will accept and pay a claim for adverse costs ordered against the plaintiff. This is because the policy usually will have some exclusions which may apply to deny the plaintiff coverage for adverse costs. Also, there is no privity of contract between the defendant and the cost insurer, so the defendant would not be able to apply to court to enforce the policy if there is a dispute.

3. You are impecunious – meaning you have little to no money or assets

In the interest of access to justice, it is important that those with real claims be able to pursue them in court, regardless of their financial situation. If you have no money or assets and you are ordered by a court to pay a sum of money for security for costs, this may mean that you would not be able to continue to advance your claim due to your lack of funds.

The caselaw has made it clear that it would be unfair to prevent someone with a real claim from advancing that claim simply due to their financial circumstances. It is important to note that the claim must have some merit, or in other words, at least a chance of succeeding with the claim as pled.

In Alary v Brown, 2015 ONSC 3021, the plaintiff’s impecuniousness was established, the Court held that “it would be unjust just to deprive them of the ability to advance a claim with some merit in court with their limited financial circumstances”.

In that case the plaintiff was employed by the Federal Government and earned a reasonable income, and his wife was also employed. However, they were heavily indebted and did not have any liquid assets.

As for the argument of merit, as per Alary, the Court held that in order for a defendant to be successful in bringing such a security for costs motion, they must establish that there is “no chance of success”, and as long as there is “some merit to this argument if the facts as pleaded are proven” then the claim cannot be found frivolous or without any merit.

The arguments mentioned are just 3 methods a plaintiff can use to argue against a defendant’s motion for security for costs. They are in no way meant to be an exhaustive list, and there are definitely other arguments that may be applicable to you.